Company News and Events

Enews – November 2018

In this month’s Enews we report on the Chancellor’s key announcements from the Budget and the latest guidance on a ‘No Deal Brexit’.

HMRC has also announced the pilot is open for Making Tax Digital for VAT, but the deferral of the start date for some. With the latest guidance for employers, there is lots to update you on.

Article Index

Budget 2018

Personal tax changes – allowance and basic rate band increases

Capital allowances changes

Entrepreneurs’ Relief changes

Making Tax Digital for VAT public pilot opens and deferral for some businesses

New guidance for employers

HMRC countdown: file your tax return

Further contingency planning guidance on a ‘No deal Brexit’

Budget 2018

The Chancellor Philip Hammond presented his second Autumn Budget on Monday 29 October 2018. In his speech he stated that ‘austerity is coming to an end – but discipline will remain’. He also promised a ‘double deal dividend’ if the Brexit negotiations are successful but stated that there may be a full-scale Spring Budget in 2019 if not.

Personal tax changes – allowance and basic rate band increases

At the Budget, the Chancellor announced that increases to the personal allowance and basic rate band for 2019/20.

The personal allowance is currently £11,850. The personal allowance for 2019/20 will be £12,500. Also for 2019/20, the basic rate band will be increased to £37,500 so that the threshold at which the 40% band applies is £50,000 for those who are entitled to the full personal allowance. The additional rate of tax of 45% will remain payable on taxable income above £150,000.

The government had pledged to raise the thresholds to these levels by 2020/21.

Capital allowances changes

A number of changes to capital allowances were announced at the Budget, including an increase in the Annual Investment Allowance (AIA), for two years to £1 million, in relation to qualifying expenditure incurred from 1 January 2019. The AIA is currently £200,000 per annum. Complex calculations may apply to accounting periods which straddle 1 January 2019.

Other changes to the rules include:

a reduction in the rate of writing down allowance on the special rate pool of plant and machinery, including long-life assets, thermal insulation, integral features and expenditure on cars with CO2 emissions of more than 110g/km, from 8% to 6% from April 2019. Complex calculations may apply to accounting periods which straddle this date

clarification as to precisely which costs of altering land for the purposes of installing qualifying plant or machinery qualify for capital allowances, for claims on or after 29 October 2018

the end of the 100% first year allowance and first year tax credits for products on the Energy Technology List and Water Technology List from April 2020

an extension of the current 100% first year allowance for expenditure incurred on electric charge-point equipment until 2023.

In addition, a new capital allowances regime will be introduced for structures and buildings. It will be known as the Structures and Buildings Allowance and will apply to new non-residential structures and buildings. Relief will be provided on eligible construction costs incurred on or after 29 October 2018, at an annual rate of 2% on a straight-line basis.

Entrepreneurs’ Relief changes

The government announced, as part of the Budget, that some changes are being made to the rules for Entrepreneurs’ Relief (ER) with immediate effect for disposals on or after 29 October 2018. Two new tests are to be added to the definition of a ‘personal company’, requiring the claimant to have a 5% interest in both the distributable profits and the net assets of the company. The new tests must be met, in addition to the existing tests, throughout the specified period in order for relief to be due. The existing tests already require a 5% interest in the ordinary share capital and 5% of voting rights.

Minimum qualifying period

The government will legislate in Finance Bill 2018-19 to increase the minimum period throughout which certain conditions must be met to qualify for ER, from one year to two years. The measure will have effect for disposals on or after 6 April 2019 except where a business ceased before 29 October 2018.

Where the claimant’s business ceased, or their personal company ceased to be a trading company (or the holding company of a trading group) before 29 October 2018, the existing one year qualifying period will continue to apply.

Dilution of holdings below 5%

Draft legislation has already been issued to provide a potential entitlement to ER where an individual’s holding in a company is reduced below the normal 5% qualifying level (meaning 5% of both ordinary share capital and voting power). The relief will only apply where the reduction below 5% occurs as a result of the company raising funds for commercial purposes by means of an issue of new shares, wholly for cash consideration.

Where a disposal of the shareholding prior to the issue would have resulted in a gain which would have qualified for ER, shareholders will be able to make an election treating them as if they had disposed of their shares and immediately reacquired them at market value just before dilution. To avoid an immediate CGT bill on this deemed disposal, a further election can be made to defer the gain until the shares are sold. ER can then be claimed on the deferred gain in the year the shares are sold under the rules in force at that time.

The new rules will apply for share issues which occur on or after 6 April 2019.

Please contact us if you would like further information on how this may affect you.

Making Tax Digital for VAT public pilot opens and deferral for some businesses

HMRC has opened the Making Tax Digital for VAT (MTDfV) public pilot. However certain VAT-registered businesses (around 3.5% according to HMRC) with more complex requirements will be deferred from being subject to MTD for six months.

Essentially, the public pilot is now open to sole traders and companies using standard VAT accounting. This applies whether returns are done monthly or quarterly provided they are up to date. Those signing up for the pilot will be required to keep their VAT records digitally from the first day of the period covered by their next VAT Return and submit their return using the appropriate software.

Further piloting plans

HMRC intends to roll out further pilots for partnerships, those that trade with the EU and users of the Flat Rate scheme as set out in the timetable.

Date

Activity

Late 2018

Private testing begins with partnerships, those customers that trade with the EU, and users of the Flat Rate Scheme.

Late 2018 / early 2019

Open to other sole traders and companies who are not up to date with their VAT and businesses newly registered for VAT that have not previously submitted a VAT return.

Early 2019

Open to partnerships and those taxpayers that trade with the EU.

Six months’ deferral

Making Tax Digital for VAT is to be introduced from 1 April 2019. However, HMRC has announced that the mandated implementation has been deferred until 1 October 2019 for certain taxpayers:

HMRC countdown: file your tax return

With less than 100 days until the self assessment tax return deadline of 31 January 2019, HMRC is urging taxpayers to complete their tax returns early, in order to avoid the last minute rush.

The deadline for submitting 2017/18 self assessment tax returns online is 31 January 2019. An automatic penalty of £100 applies if the return is late.

HMRC advise that last year, more than 11 million taxpayers completed a 2016/17 Self Assessment tax return, with 10.7 million completing on time. There were 4,852,744 taxpayers who filed in January 2018 (44.8% of the total), and 758,707 on 31 January, the deadline day.

HMRC is advising taxpayers not to leave the completion of their 2017/18 Self Assessment tax until the last minute.

‘The deadline for completing Self Assessment tax returns may be 100 days away, yet many of us wait until January to start the process. Time flies once the festive period is underway, yet the ‘niggle’ to file your tax return remains.’

‘We want to help people get their tax returns right – starting the process early and giving yourself time to gather all the information you need will help avoid the last minute, stressful rush to complete it on time. Let’s beat that niggle.’

Further contingency planning guidance on a ‘No deal Brexit’

HMRC has issued a Partnership Pack to help businesses carry out contingency planning and to help their customers, members and clients to:

think about how they will need to adapt their business to comply with new systems, processes and controls

assess the impact of the increased demand for customs declarations on their business

consider whether they need to recruit and train additional staff

stay up-to-date with these changes

Meanwhile the Confederation of British Industry (CBI) reports that ‘patience is now threadbare’ amongst UK businesses in regard to the government’s progress in its Brexit negotiations with the EU.

A survey, carried out by the CBI, revealed that 80% of firms believe that Brexit uncertainty is having a ‘negative impact’ on their investment decisions. The majority of businesses polled stated that they may have to implement ‘damaging’ contingency plans if no further progress is made by December.

Carolyn Fairbairn, Director General of the CBI, said:

‘The situation is now urgent. The speed of negotiations is being outpaced by the reality firms are facing on the ground.

‘Unless a Withdrawal Agreement is locked down by December, firms will press the button on their contingency plans. Jobs will be lost and supply chains moved.’

‘As long as ‘no deal’ remains a possibility, the effect is corrosive for the UK economy, jobs and communities.’

Enews – October 2018

In this month’s Enews we report that the government has announced the UK Budget date and that Class 2 National Insurance Contributions will no longer be scrapped. The government has also published lots of guidance on a ‘no deal Brexit’. With information on deliberate tax defaulters and the latest minimum wage statistics, there is lots to update you on.

Article Index

UK Budget date announced: Monday 29 October

Self-employed Class 2 National Insurance will not be scrapped

‘No deal’ Brexit guidance and small business survey

Deadline for ‘paper’ self assessment tax returns

HMRC has published an updated list of deliberate tax defaulters

Genuine HMRC contact and recognising phishing emails and texts

HMRC identify record £15.6 million minimum wage underpayments

UK Budget date announced: Monday 29 October

The Chancellor of the Exchequer, Philip Hammond, has announced that the Budget will take place on Monday 29 October.

Breaking with the tradition of a Wednesday in November, perhaps in a bid to avoid the ongoing Brexit negotiations, the government is expected to set out its plans ‘to build a stronger, more prosperous economy, building on the recent Spring Statement and last year’s Budget’.

The government announcements are expected to include updates on draft legislation and consultations, and proposed tax rates and reliefs.

Self-employed Class 2 National Insurance will not be scrapped

The government has decided not to proceed with plans to abolish Class 2 National Insurance Contributions (NICs) from April 2019.

Class 2 NICs are currently paid at a rate of £2.95 per week by self-employed individuals with profits of £6,205 or more per year. The government had planned to scrap the Class 2 contribution and had been investigating ways in which self-employed individuals with low profits, could maintain their State Pension entitlement if this inexpensive contribution had been abolished.

In a written statement to MPs, Robert Jenrick, Exchequer Secretary to the Treasury, stated that:

‘This change was originally intended to simplify the tax system for the self-employed. We delayed the implementation of this policy in November to consider concerns relating to the impact on self-employed individuals with low profits. We have since engaged with interested parties to explore the issue and further options for addressing any unintended consequences.’

‘A significant number of self-employed individuals on the lowest profits would have seen the voluntary payment they make to maintain access to the State Pension rise substantially. Having listened to those likely to be affected by this change we have concluded that it would not be right to proceed during this parliament, given the negative impacts it could have on some of the lowest earning in our society.’

‘No deal’ Brexit guidance and small business survey

Following the issue of some ‘no deal’ Brexit technical notices, in August, the government has issued further notices with the aim of helping both businesses and individuals to prepare in the event of a UK-EU agreement not being realised.

The second and third batches of notices cover topics such as passports, driving licences together with data protection and mobile phone roaming charges amongst other topics. The full list and access to the collection of technical notices can be viewed by visiting the link at the end of this article. The government has confirmed they plan to issue further technical notices.

Although reaching a deal remains the ‘overriding priority’ unless a Withdrawal Agreement is ratified by the UK and European Parliaments, the possibility of the UK leaving the EU without a deal on 29 March 2019 remains.

Meanwhile, a survey by the Federation of Small Businesses (FSB) has revealed that:

Only 14% of small businesses have started planning for a no deal Brexit.

A further 41% believe that a no deal Brexit will have an impact on their business but have not yet started planning for the possibility.

10% believe that a no deal Brexit will have a positive impact on their ability to do business whilst 48% believe that a no deal Brexit will have a negative effect on their ability to do business. This figure rises sharply to 66% for those small firms that trade with the EU and to 61% for those that employ a staff member from the EU.

FSB National Chairman, Mike Cherry, said:

‘Looking at this research it is obvious that our small firms are not prepared or ready for a chaotic no deal Brexit and the impact that it will have on their businesses. If you sell your products to the EU, buy goods from the EU or if your business relies on staff from the EU, you now see this outcome as a clear and present threat to your business.’

Deadline for ‘paper’ self assessment tax returns

For those individuals who have previously submitted ‘paper’ self assessment tax returns the deadline for the 2017/18 return is 31 October 2018. Returns submitted after that date must be submitted electronically or they will incur a minimum penalty of £100. The penalty applies even when there is no tax to pay or the tax is paid on time.

If you would like any help with the completion of your return, please do get in touch.

HMRC has published an updated list of deliberate tax defaulters

HMRC has published an updated list of deliberate tax defaulters. The list includes details of taxpayers who have incurred a penalty because they have either:

deliberately provided one or more inaccurate documents to HMRC

deliberately failed to comply with an HMRC obligation

committed a VAT or excise wrongdoing.

HMRC’s criteria for publishing this information also states that ‘These deliberate acts have resulted in HMRC establishing an additional amount of tax of more than £25,000. HMRC only publish the details where the taxpayer has not made a full and immediate disclosure when HMRC started to investigate or prior to any investigation.’

HMRC identify record £15.6 million minimum wage underpayments

HMRC has announced that they achieved record enforcement results this year, identifying £15.6million of minimum wage underpayments.

The number of workers identified as underpaid was double that in 2016/17 and the highest number since the National Minimum Wage came into force.

The figures reveal:

a record £15.6 million of underpayment identified for more than 200,000 workers

employers fined £14 million for not meeting legal obligations

more than 600 employers named in 2017/18 as part of ‘naming’ rounds.

Business Minister Kelly Tolhurst, said:

‘We are dedicated to stopping underpayment of the minimum wage. Employers must recognise their responsibilities and pay their workers the money they are entitled to.’

‘The UK’s lowest paid workers have had the fastest wage growth in 20 years thanks to the National Living Wage and today’s figures serve as a reminder to all employers to check they are getting their workers’ pay right.’

HMRC has prioritised the social care, retail, commercial warehousing and gig economy sectors for enforcement of the minimum wage. This is alongside employment agencies, apprentices and migrant workers. These are the sectors where HMRC believes non-compliance with National Minimum Wage is more widespread.

Enews – September 2018

In this month’s Enews we report on HMRC’s reminder to taxpayers regarding declaring offshore assets and available software for MTD for VAT. We also advise on the latest fuel advisory rates for company car drivers and guidance for employers.

With statistics on Stamp Duty Land Tax and a raft of ‘No deal’ Brexit notices there is lots to update you on.

Article Index

HMRC warning: time to declare offshore assets

Stamp duty cut: 121,500 households save £284 million

Software suppliers – Making Tax Digital for VAT

Advisory fuel rates for company cars

HMRC latest guidance for employers

‘No deal’ Brexit guidance

HMRC warning: time to declare offshore assets

HMRC is warning that taxpayers could face penalties if they fail to declare their income on foreign assets before new ‘Requirement to Correct’ legislation comes into force.

HMRC is urging UK taxpayers to come forward and declare any foreign income or profits on offshore assets before 30 September to avoid higher tax penalties.

New legislation called ‘Requirement to Correct’ requires UK taxpayers to notify HMRC about any offshore tax liabilities relating to UK income tax, capital gains tax, or inheritance tax. The most common reasons for declaring offshore tax are in relation to foreign property, investment income and moving money into the UK from abroad. HMRC has stated that over 17,000 people have already been in contact to notify they have tax due from sources of foreign income, such as their holiday homes and overseas properties.

The Financial Secretary to the Treasury, Mel Stride MP, said:

‘Since 2010 we have secured over £2.8bn for our vital public services by tackling offshore tax evaders, and we will continue to relentlessly crack down on those not playing by the rules.’

‘This new measure will place higher penalties on those who do not contact HMRC and ensure their offshore tax liabilities are correct. I urge anyone affected to get in touch with HMRC now.’

Common Reporting Standard (CRS)

From 1 October more than 100 countries, including the UK, will be able to exchange data on financial accounts under the CRS. It is expected that the CRS data will significantly enhance HMRC’s ability to detect offshore non-compliance and it is in taxpayers’ interests to correct any non-compliance before that data is received.

Taxpayers can correct their tax liabilities by:

Using HMRC’s digital disclosure service as part of the Worldwide Disclosure Facility or any other service provided by HMRC as a means of correcting tax non-compliance.

Telling an officer of HMRC in the course of an enquiry into your affairs.

Or any other method agreed with HMRC.

Once a taxpayer has notified HMRC of their intention to make a declaration, by the deadline of 30 September, they will then have 90 days to make the full disclosure and pay any tax owed. To ensure there is an incentive for taxpayers to correct any offshore tax non-compliance on or before 30 September 2018 there are increased penalties for any failures to correct by that date.

If taxpayers are confident that their tax affairs are in order, then they do not need to worry. However if you are unsure, please contact us.

Stamp duty cut: 121,500 households save £284 million

According to the latest statistics 121,500 first-time buyers have saved a total of £284,000,000 following the introduction of a relief for first-time buyers under the Stamp Duty Land Tax rules which apply in England and Northern Ireland.

Over the next five years, it is estimated that this relief, part of the UK government’s housing policy will help over 1 million people getting onto the housing ladder.

First-time buyers purchasing homes of £300,000 and under pay no stamp duty at all, and those who bought properties of up to £500,000 will also have benefitted from a stamp duty cut.

Financial Secretary to the Treasury, Mel Stride, said:

‘Once again, we can see that our cut to stamp duty for first-time buyers is helping to make the dream of home ownership a reality for a new generation – exactly as we intended.’

‘In addition, we’re building more homes in the right areas, and have introduced generous schemes such as the Lifetime ISA and Help to Buy.’

Software suppliers – Making Tax Digital for VAT

HMRC is working with more than 150 software suppliers who have said they will provide software for Making Tax Digital for VAT (MTDfV) in time for April 2019.

From 1 April 2019, businesses will be mandated to use the MTDfB system to meet their VAT obligations under MTDfV. Only businesses with a taxable turnover above the VAT threshold (currently £85,000) will be required to use MTDfV, however HMRC is piloting the new system, on a small scale, from April 2018.

HMRC has advised that more than 40 suppliers have said they will have software ready during the first phase of the pilot and other software suppliers are expected to follow. HMRC will open up the pilot to allow more businesses and agents to join later in 2018.

HMRC has advised that the list will be updated as more software meets the criteria. HMRC are advising businesses to check with their existing software supplier to find out if they will be supplying suitable software.

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which take effect from 1 September 2018. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 September 2018 are:

‘No deal’ Brexit guidance

The government has issued some ‘no deal’ Brexit technical notices, with the aim of helping both businesses and individuals to prepare in the event of a UK-EU agreement not being realised.

The government has published the first 25 notices. Brexit Secretary Dominic Raab was keen to emphasise that reaching a deal remains the ‘overriding priority’. However, until a Withdrawal Agreement is ratified by the UK and European Parliaments, the possibility of the UK leaving the EU without a deal on 29 March 2019 remains.

The 25 documents cover a range of different areas, including VAT and trading, financial services, farming and workplace rights.

Josh Hardie, Deputy Director General at the CBI, said:

‘It’s right and responsible that the government has supplied information to businesses on issues from financial services passporting to food labelling, all of which will help lower the risks of the harshest outcomes from a ‘no deal’ Brexit.’

The government has confirmed further technical notices will be issued in September.

Enews – August 2018

In this month’s Enews we report on Making Tax Digital for VAT and the Bank of England interest rate rise. Meanwhile the Scotland Parliament introduces a tax relief for first-time buyers and the UK government has published the next round of draft tax legislation. With reminders that the Marriage Allowance and Tax-Free Childcare are under claimed there is lots to update you on.

Article Index

Making Tax Digital for VAT

Bank of England raise interest rate

Internet links: BBC news CBI news

Scotland introduces relief for first time buyers

Next round of tax draft tax legislation published

One million couples still eligible for £900 tax boost

Consultation on pensions cold calling ban

Use Tax-Free Childcare over the summer holidays

Making Tax Digital for VAT

HMRC has published further information on Making Tax Digital for VAT (MTDfV). The VAT notice sets out some further details of the MTDfV regime, which will ultimately require taxpayers to move to a fully digital tax system.

Under the rules, businesses with a taxable turnover above the VAT threshold (currently £85,000) will be required to keep digital records for VAT purposes using ‘functional compatible software’ and provide their VAT return information to HMRC via an application programming interface.

This notice explains:

the digital records businesses must keep and the ways to record transactions digitally in certain special circumstances

what counts as ‘functional compatible software’, and when software programs do and do not need to be digitally linked where a combination of programs is used.

The new rules have effect from 1 April 2019, where a taxpayer has a ‘prescribed accounting period’ which begins on that date, and otherwise from the first day of a taxpayer’s first prescribed accounting period beginning after 1 April 2019.

Please contact us for advice and support on the introduction of MTDfV.

Bank of England raise interest rate

The Bank of England has raised the interest rate from 0.5% to 0.75%. The quarter of a percentage point rise sets the rate at its highest level since March 2009.

The rise in the interest rate will no doubt increase the interest costs of residential mortgages that have variable or tracker rates. It will be interesting to see if the rise in the rate is passed on to savers.

In response to the increase in the rate Alpesh Paleja, CBI Principal Economist, said:

‘This decision was in line with our expectations. The case for another rate rise has been building, with inflationary pressures being stoked by a tight labour market and many indicators now suggesting that weak activity in the first quarter of 2018 was a blip.’

‘The Monetary Policy Committee has signalled further rate rises over the next few years, if the economy evolves as they expect. These are likely to be very slow and limited, particularly over the next year as uncertainty around Brexit takes its toll on business investment.’

Internet links: BBC news CBI news

Scotland introduces relief for first time buyers

First-time buyers in Scotland will be helped to purchase their first home through a new tax relief which applies to Scottish Land and Buildings Transaction Tax (LBTT).

According to the Scottish Parliament approximately 80% of first-time buyers will pay no LBTT once the LBTT First Time Buyer relief takes effect. The change sees the zero-rated LBTT threshold raised to £175,000 for first-time buyers. Those purchasing property at a higher value will have their tax reduced by a maximum of £600. The Scottish Parliament expect that around 12,000 first-time buyers will benefit each year.

Next round of tax draft tax legislation published

The government has published draft legislation for Finance Bill 2018-19 which is currently open for consultation, and ‘continues the government’s commitment to a competitive and fair tax system’.

The draft legislation could affect a range of taxes, from Stamp Duty Land Tax (SDLT) to income tax.

The draft legislation also outlines the government’s approach to the Making Tax Digital (MTD) penalty system, with HMRC outlining its intention to utilise a two-tier penalty model for businesses and individuals who fail to pay their tax on time.

The July publication of the Finance Bill 2018-19 draft legislation forms part of the government’s new fiscal timetable.

The consultation on the draft legislation will run until 31 August 2018. The final contents of ‘Finance Bill 2018-19’ will be subject to confirmation at Budget 2018, expected later this year in November.

One million couples still eligible for £900 tax boost

HMRC has highlighted that three million UK couples have already taken advantage of Marriage Allowance but a million more are still eligible for the tax break.

The Marriage Allowance allows certain couples, where neither pay tax at more than the basic rate, to transfer 10% of their unused personal allowance to their spouse or civil partner, reducing their tax bill by up to £238 a year in 2018/19. The allowance was introduced in 2015 and it is possible to backdate the claim to earlier tax years.

Please contact us if you would like to know more about this allowance and whether you are eligible.

Use Tax-Free Childcare over the summer holidays

The Government is reminding ‘stressed out parents’ that help may be available for childcare costs during the summer holidays. According to a YouGov poll, 31% of parents feel stressed trying to arrange childcare for the school holidays.

The poll, for HMRC, also found that around 30% of parents worried about balancing their job and school holiday childcare. With 54% admitting they look forward to their children returning to school in September.

HMRC is reminding working parents with summer childcare costs, that they can use Tax-Free Childcare (TFC), which is worth up to £2,000 per child per year, to pay for regulated holiday clubs during the school holidays. Parents are advised that it is possible to pay into their account regularly and ‘save up’ their TFC allowance and use it for childcare during school holidays.

Enews – July 2018

In this month’s Enews we report on the Supreme Court’s ruling on workers’ rights and the latest guidance from HMRC for employers. We also consider the latest tax gap figures and HMRC’s efforts to stop fraudsters. With new rules to introduce a VAT reverse charge for construction services and an extension to the easement for RTI payroll penalties there are lots to consider.

Article Index

Workers’ rights for Pimlico Plumber

Latest guidance for employers

UK ‘tax gap’ falls to 5.7%

HMRC extends RTI late filing easement until April 2019

HMRC saves public £2.4M by stopping fraudsters

VAT reverse charge for construction services consultation

Enterprise Management Incentive continues

Workers’ rights for Pimlico Plumber

A plumber has won a legal battle for working rights in a Supreme Court ruling.

The Supreme court has backed up an earlier ruling by an Employment Tribunal in the case of a contractor engaged by Pimlico Plumbers.

Plumber Gary Smith carried out plumbing jobs for Pimlico Plumbers. He was VAT registered and paid tax on a self employed tax basis.

The Supreme Court has ruled that Gary Smith was entitled to workers’ rights and confirmed that the Employment Tribunal was ‘entitled to conclude’ that Mr Smith was a worker.

As a worker Mr Smith was entitled to rights including holiday and sick pay. Details of workers rights can be found GOV.UK worker

Pimlico Plumbers chief executive Charlie Mullins said that he was ‘disgusted by the approach taken to this case by the highest court in the United Kingdom.

‘This was a poor decision that will potentially leave thousands of companies, employing millions of contractors, wondering if one day soon they will get a nasty surprise from a former contractor demanding more money, despite having been paid in full years ago. It can only lead to a tsunami of claims.’

UK ‘tax gap’ falls to 5.7%

HMRC has confirmed that the tax gap for 2016/17 has fallen to 5.7%.

The ‘tax gap’ is the difference between the tax that should theoretically be paid to HMRC and the actual tax that has been paid. HMRC believes that the tax gap is lower as a result of its work to help taxpayers get things right from the start, and the department’s sustained efforts to tackle evasion and avoidance.

Key findings from the Measuring the Tax Gap publication include:

small businesses made up the largest proportion of unpaid tax by taxpayer group at £13.7 billion

taxpayer errors and failure to take reasonable care made up £9.2 billion of unpaid taxes by behaviour, while criminal attacks made up £5.4 billion

income tax, national insurance contributions and capital gains tax made up the largest proportion of the tax gap by tax type at £7.9 billion for 2016/17; equivalent to 16.4% of self assessment liabilities

the VAT gap showed a declining trend over time, falling from 12.5% in 2005/06 to 8.9% in 2016/17.

Mel Stride, Financial Secretary to the Treasury, said:

‘These really positive figures show that the tax gap is the lowest in the last 5 years, which reflects the hard work that HMRC and I have been doing to ensure we support businesses to pay the right tax at the right time and clamp down on tax evasion and avoidance.’

‘Collecting taxes is essential for funding our vital public services such as the NHS – indeed, had the tax gap remained at its 2005/06 level the UK would have lost £71 billion in revenue destined for public services, enough to build 200 hospitals.’

HMRC extends RTI late filing easement until April 2019

HMRC has extended the payroll Real Time Information (RTI) late filing easement until April 2019.

Under RTI payroll obligations employers must submit details of payments made to employees on or before the day that wages are paid via a Full Payment Submission.

The updated guidance extends the easement, introduced in April 2015 to April 2019. The easement applies where an employer’s FPS is late but all reported payments on the FPS are within three days of the employees’ payday. This easement applies from 6 March 2015 to 5 April 2019. However, HMRC go on to clarify that employers who persistently file after the payment date but within three days may be contacted or considered for a penalty. Potential monthly penalties range from £100 to £400 depending on the size of the employer.

HMRC saves public £2.4M by stopping fraudsters

HMRC has announced that it has saved the public over £2.4m by tackling fraudsters that trick them into using premium rate phone numbers for services that HMRC provide for free.

HMRC has reported that scammers create websites that look similar to HMRC’s official site and then direct the public to call numbers with extortionate costs in comparison to the low cost and no cost services that HMRC provides.

These websites promote premium rate phone numbers as a means of phoning HMRC but these are call forwarding services which connect the unsuspecting to HMRC at a premium rate.

HMRC’s has confirmed that its genuine 0300 numbers are mainly free or charged at the local landline rate. In other cases, websites charge for forwarding information to HMRC which can be provided free of charge via GOV.UK website.

HMRC has successfully challenged the ownership of these websites, masquerading as official websites, and removed them from the hands of cheats. Analysis carried out shows that had HMRC not taken this action then the public would have lost £2.4m to these scams.

Mel Stride, Financial Secretary to the Treasury said:

‘We know that HMRC is the most spoofed government brand as criminals try to take advantage of the fact that everyone has some involvement with the tax authority. In this particular case, scammers try to dupe the public into paying large sums for services that are available for free or low cost.’

‘This is a brazen con, charging premium rates whilst simply redirecting calls to the real HMRC numbers that are available at low or no cost. It is a testament to the hard work of HMRC that they have prevented criminals extracting £2.4m from the public.’

VAT reverse charge for construction services consultation

HMRC proposes to introduce new VAT rules for construction services which are subject to consultation.

HMRC has published a draft statutory instrument for technical consultation together with a draft explanatory memorandum and a draft tax information and impact note.

Under the draft legislation supplies of standard or reduced-rated construction services between construction or building businesses will be subject to a domestic reverse charge. This means that the customer will be liable to account for VAT due, instead of the supplier.

The legislation will not apply to specified supplies made to customers who are consumers, or to those that use specified supplies to make other supplies, such as those selling new houses.

The legislation is expected to take effect from 1 October 2019. More details of the proposed new rules can be found at the following link.

Enterprise Management Incentive continues

It has previously been reported that the Enterprise Management Incentive scheme State Aid approval lapsed on 6 April 2018. HMRC had previously warned that EMI share options granted in the period from 7 April 2018 until EU State Aid approval was received may not be eligible for the tax advantages afforded to option holders but has now confirmed the scheme will operate as before.

On 15 May EU approval was granted and HMRC has now confirmed that the Enterprise Management Incentives scheme will continue to operate as before and no changes have therefore been made to the scheme.

The Enterprise Management Incentive (EMI) allows selected employees (often key to the employer) to be given the opportunity to acquire a significant number of shares in their employer through the issue of options. An EMI can offer significant tax advantages as the scheme allows options to be granted to employees which then allows shares to be acquired without any tax bill arising until the shares are sold.

Enews – June 2018

In this month’s eNews we report on new advisory fuel rates for company cars, the latest tax refund scam warnings, and National Minimum Wage enforcement from HMRC.

A new consultation has been launched on off-payroll working in the private sector, State Aid approval has been granted for Enterprise Management Incentive schemes and a report has been issued on Universal Credit and the self employed. We also report on the Welsh Assembly’s plans for Welsh income tax rates.

Article Index

Advisory fuel rates for company cars

Tax refund scams warning from HMRC

200,000 receive back pay as HMRC enforce National Minimum Wage

Off-payroll working in the private sector consultation

Universal Credit and self employment

State Aid approval granted for the Enterprise Management Incentive

Wales to set devolved income tax rates

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which take effect from 1 June 2018. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 June 2018 are:

Tax refund scams warning from HMRC

HMRC has issued a warning to taxpayers regarding the latest tax refund scams. These scams are targeting individuals via email and SMS messages.

HMRC is currently processing genuine tax refunds for the 2017/18 tax year and the fraudsters are sending scam messages which claim that taxpayers are entitled to a rebate. These messages go on to request that they provide their personal and account details in order to make their claim.

HMRC is keen to stress that it will only ever inform individuals of a tax refund by post or through their employer, and never via email, text messaging or voicemail.

Commenting on the issue, Treasury Minister Mel Stride said

‘We know that criminals will try and use events like the end of the financial year, the self assessment deadline, and the issuing of tax refunds to target the public and attempt to get them to reveal their personal data’.

HMRC is advising taxpayers not to click on any links, download any attachments or provide any personal information, and to forward any suspect messages to HMRC.

200,000 receive back pay as HMRC enforce National Minimum Wage

BEIS and HMRC are urging underpaid workers to complain about National Minimum Wage (NMW) and National Living Wage (NLW) underpayments. Recent figures show that the number of workers receiving the money they are owed has doubled.

During 2017/18, HMRC investigators identified £15.6 million in pay owed to more than a record 200,000 of the UK’s lowest paid workers. This is an increase on the previous years figures of £10.9 million for more than 98,000 workers.

HMRC launched its online complaints service in January 2017 and believes this has contributed to the 132% increase in the number of complaints received over the last year and the amount of money HMRC has been able to recoup for those unfairly underpaid.

The figures are published as the government launches its annual advertising campaign which encourages workers to take action if they are not receiving the NMW or NLW. The online campaign urges underpaid workers to proactively complain by completing an HMRC online form.

HMRC state that the types of business receiving most complaints include restaurants, bars, hotels and hairdressing.

Business Minister Andrew Griffiths said:

‘Employers abusing the system and paying under the legal minimum are breaking the law. Short changing workers is a red line for this government and employers who cross the line will be identified by HMRC and forced to pay back every penny, and could be hit with fines of up to 200% of wages owed.

I would urge all workers, if you think you might be being underpaid then you should check your pay and call Acas on 0300 123 1100 for free and confidential advice.’

Off-payroll working in the private sector consultation

HMRC has launched a consultation on how to tackle non-compliance with the off-payroll working rules in the private sector and are asking for comments on the best way to do this.

HMRC estimates only 10% of PSCs that should apply the legislation actually do so, and the the cost of this is projected to increase from £700m in 2017/18 to £1.2bn in 2022/23.

This consultation provides an early evaluation of the public sector reform and invites responses on how best to deal with non-compliance in the private sector.

This consultation considers a number of potential options for tackling the non-compliance with the off-payroll working rules in the private sector. However, the fundamental principles of the off-payroll working rules, that the employment status test determines who should be taxed as employees, are not being considered as part of this consultation.

In respect of the public sector

‘HMRC has analysed PAYE data covering the first 10 months of the reform, from April 2017 to February 2018. This shows that in any given month since the reform was introduced, there are an estimated 58,000 extra individuals who are paying income tax and NICs undertaking work for a public authority above expected levels.

HMRC estimates that an additional £410 million of income tax and NICs has been remitted from these engagements, since the public sector reform was introduced.

On the basis of this evidence, the government’s assessment is that the public sector reform has been successful both in increasing tax compliance and resolving the compliance challenges faced by HMRC in enforcing the off-payroll working rules in the public sector.’

Private sector

‘The government considers extension of similar reform to the private sector to be the lead option which will effectively tackle non-compliance.’

The consultation closes on 10 August. We will keep you updated on this issue.

Universal Credit and self employment

The government has published a report, Universal Credit: supporting self employment which considers the issues faced by self employed claimants.

The report considers the impact of the Monthly Income Floor (MIF) earnings requirement. To be eligible for Universal Credit (UC) claimants must earn the MIF. However, the MIF assumes self employed claimants earn a regular income at least equal to the National Minimum Wage, and makes no provision for those with income and expenditure that vary from month to month. The report states that the MIF has been designed with monthly paid employed individuals in mind rather than the self employed who may have more volatile earnings.

It also considers the current system which allows self employed individuals to be exempt from meeting the MIF for the first 12 months of self employment and whether this is sufficient. The report urges the Government to extend the exemption period.

State Aid approval granted for the Enterprise Management Incentive

It has previously been reported that the Enterprise Management Incentive State Aid approval lapsed on 6 April 2018. On 15 May EU approval was granted however HMRC have not confirmed expressly that this approval will be backdated to 6 April 2018.

The Enterprise Management Incentive (EMI) allows selected employees (often key to the employer) to be given the opportunity to acquire a significant number of shares in their employer through the issue of options. An EMI can offer significant tax advantages as the scheme allows options to be granted to employees which may allow the shares to be received without any tax bill arising until the shares are sold.

HMRC had previously warned that EMI share options granted in the period from 7 April 2018 until EU State Aid approval is received may not be eligible for the tax advantages afforded to option holders.

Wales to set devolved income tax rates

From April 2019, the National Assembly for Wales will be able to vary the rates of income tax payable by Welsh taxpayers.

Responsibility for many aspects of income tax will remain with the UK government, and the tax will continue to be collected by HMRC for Welsh taxpayers.

The process for setting Welsh rates of income tax

From April 2019, the UK government will reduce each of the three income tax rates: basic, higher and additional rate, paid by Welsh taxpayers by 10 pence.

The National Assembly for Wales will then decide the three Welsh rates of income tax, which will be added to the reduced UK rates. The combination of reduced UK rates plus the Welsh rates will determine the overall rate of income tax paid by Welsh taxpayers.

If the National Assembly for Wales approves each of the Welsh rates of income tax at 10p, this will mean the rates of income tax paid by Welsh taxpayers will continue to be the same as that paid by English and Northern Irish taxpayers. However the National Assembly for Wales may decide to set different rates ‘to reflect Wales’ unique social and economic circumstances’.

Enews – May 2018

In this month’s eNews we report on the latest announcement from HMRC regarding Making Tax Digital. We also consider the looming deadline for GDPR, changes to tax reliefs following the Scottish Budget and issues to do with EMI share options. With articles on benefits in kind forms P11D,the VAT fuel scale charges and a new benefits exemption for workplace charging of employee vehicles there is lots to consider.

Changing priorities at HMRC

Over the coming years, the government plans to phase in its landmark Making Tax Digital (MTD) initiative, which will see taxpayers move to a fully digital tax system. However HMRC has shared a statement about how they are prioritising change in the department and as a result some parts of MTD will be delayed. HMRC has acknowledged the challenges in:

exiting the EU and

the ambition to become the world’s most digitally advanced tax authority.

While some of the finer details are still being decided, HMRC have announced that, to achieve the above, some aspects of MTD are to be delayed. HMRC still plan to go ahead with MTD for VAT from April 2019. Information on some of the delayed projects is set out below:

Plans to introduce further digital services for individuals

There will be ‘halted progress’ on simple assessment and real-time tax code changes. Additional services in this area will only be added where they reduce phone or post contact or otherwise deliver ‘significant savings’.

Other digitalisation of services affecting fewer individuals

HMRC has confirmed this will now happen at a ‘slower pace’. HMRC has confirmed the single digital account remains an aim of the department and they stress it will not impact the delivery of Making Tax Digital.

Voluntary Making Tax Digital for Business service for income tax

HMRC has confirmed this will continue to be available for any sole trader wishing to make quarterly updates to HMRC.

Mandatory Making Tax Digital for VAT – still ‘on track’

HMRC stated that MTD for VAT is still on track. VAT registered businesses with a turnover in excess of the £85,000 VAT registration threshold, will be required to comply with the requirements of MTD for VAT for all VAT periods commencing on or after 1 April 2019.

In addition, the government has confirmed that, it will not mandate any further MTD for Business changes before 2020, at the earliest.

GDPR compliance deadline looms

With less than one month until the introduction of the new General Data Protection Regulation (GDPR), the Federation of Small Businesses (FSB) is warning small and medium-sized enterprises (SMEs) that time is running out for them to prepare.

The business group stated that small businesses face an ‘uphill challenge’ in ensuring that they are compliant by the date when GDPR takes effect of 25 May 2018.

Under the new rules, organisations which collect, store and process individuals’ personal data will be subject to new obligations, with an increased emphasis on accountability and transparency.

The financial penalties for failing to comply are severe, with fines costing up to €20 million or up to 4% of total annual worldwide revenue, whichever is the greater.

Mike Cherry, National Chairman of the FSB said:

‘As the GDPR deadline swiftly approaches, there is a real danger that many small businesses are yet to have adequately prepared for the changes. Fortunately for these businesses, there is still time on the clock to start, or finish, their preparations.’

‘The GDPR is the largest shake-up of data protection laws for years, and whether you are a personal trainer or a consultant, most businesses will have to implement changes to their current practices to make sure they are complying with the new rules.’

Tax reliefs following the Scottish Budget

The Government has stated that it will ensure that tax reliefs continue to work as they were intended as the new Scottish Income Tax rates and bands are introduced from 6 April 2018. The Government has confirmed:

Marriage Allowance
Marriage Allowance allows taxpayers to transfer 10% of their tax-free Personal Allowance to their spouse or civil partner, reducing their tax bill by up to £230 in 2017 to 2018, and £238 in 2018/19. The UK government will ensure that all those claiming Marriage Allowance in Scotland can continue to do so at the current rate (20%).

Gift Aid
Gift Aid allows charities to claim back 25p for every £1 donated. The UK government will make changes to ensure that Scottish taxpayers can benefit from the right rate of tax relief on Gift Aid. Gift Aid will continue to be paid to charities at the basic rate, with Scottish taxpayers able to claim the correct amount of additional relief on top of this.

Pensions relief at source
The UK government confirmed that current processes will continue while it works with stakeholders to establish how this will work in the longer term. For 2018/19, Scottish taxpayers who receive relief on their contributions at source will, therefore, continue to receive relief in their pension pot at 20%, with no adjustment for those taxed at a rate of less than 20%, and scope for those taxed at a rate higher than 20% to claim additional relief.

Social security pension lump sum
The UK government will make changes so that Scottish taxpayers who receive a social security pension lump sum will be taxed, where appropriate, at the new Scottish starter rate.

Finance cost relief This will continue to apply at 20%, the same rate applicable to landlords across the UK.

Please contact us if you have queries on the workings of any of these tax reliefs for Scottish taxpayers and those resident elsewhere across the United Kingdom.

EMI options may not qualify for tax relief

The Enterprise Management Incentive (EMI) allows selected employees (often key to the employer) to be given the opportunity to acquire a significant number of shares in their employer through the issue of options. An EMI can offer significant tax advantages as the share option scheme allows options to be granted to employees which may allow the shares to be received without any tax bill arising until the shares are sold.

HMRC have warned that EMI share options granted in the period from 7 April 2018 until EU State Aid approval is received may not be eligible for the tax advantages presently afforded to option holders, and accordingly share options granted in that period as EMI share options may necessarily fall to be treated as non-tax advantaged employment-related securities options meaning that the options may be taxable when exercised.

To read more, please visit the link below or contact us for specific advice.

P11D deadline approaching

The forms P11D which report details of benefits and some expenses provided to employees and directors for the year ended 5 April 2018, are due for submission to HMRC by 6 July 2017. The process of gathering the necessary information can take some time, so it is important that this process is not left to the last minute.

Employees pay tax on benefits provided as shown on the P11D, generally via a PAYE coding notice adjustment or through the self assessment system. Significant changes were introduced to the rules for reporting expenses from 6 April 2016.

Some employers ‘payroll’ benefits and in this case the benefits do not need to be reported on forms P11D but employers should advise employees of the amount of benefits payrolled.

In addition, regardless of whether the benefits are being reported via P11D or payrolled the employer has to pay Class 1A National Insurance Contributions at 13.8% on the provision of most benefits. The calculation of this liability is detailed on the P11D(b) form. The deadline for payment of the Class 1A NIC is 19th July (or 22nd for cleared electronic payment).

HMRC produce an expenses and benefits toolkit. The toolkit consists of a checklist which may be used by advisers or employers to check they are completing the forms correctly.

If you would like any help with the completion of the forms or the calculation of the associated Class 1A NIC please get in touch.

HMRC are consulting on the tax exemption which will apply from 6 April 2018 on workplace electric charging facilities used by employees.

It was announced in the Autumn Budget 2017 that the government intends to implement an exemption for the benefit of electricity provided by an employer, at the workplace, to charge electric or plug-in hybrid vehicles. The necessary legislation will be included in the Finance Bill later this year and its effect will be made retrospective to 6 April 2018.

This means that there is no need for employers to report the value of electricity provided for the workplace charging of employees’ vehicles from that date.

This guidance will be of interest to employers that pay taxable benefits to employees and provide electric charging points for employee use and the provision of workplace charging facilities, which vehicles the exemption covers and the qualifying conditions of the exemption.

Enews – April 2018

In this month’s Enews we report on a late reprieve for childcare vouchers and Spring Statement announcements. We also consider new Data Protection rules coming into force in May. With the legislation enacted for the roll out of Making Tax Digital for VAT (MTDfV) and the latest changes for employers there is lots to update you on.

Article Index

GDPR

Employer-Supported Childcare gets a reprieve

Making Tax Digital for VAT from April 2019

Welsh Land Transaction Tax introduced

Income tax changes from 6 April 2018

Update for employers and their employees

Spring Statement announces consultations

GDPR

New data protection rules from General Data Protection Regulation (GDPR) will replace the
Data Protection Act in the UK from 25 May 2018.

GDPR is designed to safeguard personal data of citizens from EU member states, with particular emphasis on transparency and accountability. It applies to all businesses in the EU and non-compliance will lead to substantial fines.

The new GDPR is a regulation which is intended to strengthen and unify data protection for all individuals within the European Union (EU). The regulation will become a law without exception in the UK from 25 May 2018. The government has confirmed that the UK’s decision to leave the EU will not affect the commencement of the GDPR.

The government has also confirmed that the UK will replace the 1988 Data Protection Act (DPA) with legislation that mirrors GDPR, post-Brexit. This means that any business, big or small, will be required to comply with GDPR – which deals with secure collection, storage and usage of clients’ personal data.

Failure to comply with the regulation can result in heavy fines of up to €20 million or 4% of the businesses’ annual turnover (whichever is higher amount).

Employer-Supported Childcare gets a reprieve

Many employers help employees with childcare costs, often by providing childcare vouchers by way of salary sacrifice. Following the roll out of Tax-Free Childcare (TFC), the new government scheme to help working parents, existing Employer-Supported Childcare (ESC) schemes were expected to close to new joiners from April 2018.

However following the Chancellor’s Spring Statement, Education Secretary Damian Hinds, made a concession to delay scrapping the scheme by six-months.

The Childcare Choices website which provides useful guidance to parents on the childcare options available to them including ESC, TFC and other free entitlements has been updated to show that childcare vouchers will be available to new joiners until the end of September 2018.

Under the rules employees already using ESC can choose whether to remain in existing schemes or switch to TFC, but parents cannot be in both TFC and ESC at the same time.

Making Tax Digital for VAT from April 2019

The regulations to bring into force Making Tax Digital for VAT (MTDfV) are now law, and digital VAT returns will be required from 1 April 2019.

MTDfV is the first phase of HMRC’s landmark Making Tax Digital (MTD) regime, which will ultimately require taxpayers to move to a fully digital tax system. Regulations have now been issued which set out the requirements for MTDfV.

Under the new rules, businesses with a turnover above the VAT threshold (currently £85,000) must keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD functional compatible software.

The new rules have effect from 1 April 2019, where a taxpayer has a ‘prescribed accounting period’ which begins on that date, and otherwise from the first day of a taxpayer’s first prescribed accounting period beginning after 1 April 2019.

HMRC is piloting MTDfV during 2018, ahead of its introduction in April 2019. Keeping digital records and making quarterly updates will not be mandatory for taxes other than VAT before April 2020, although businesses below the VAT threshold which have voluntarily registered for VAT can opt to join the scheme.

As with electronic VAT filing at present, there will be some exemptions from MTD for VAT. However, the exemption categories are tightly-drawn and unlikely to be applicable to most VAT registered businesses.

Keeping digital records will not mean businesses are mandated to use digital invoices and receipts but the actual recording of supplies made and received must be digital. It is likely that third party commercial software will be required. Software will not be available from HMRC. The use of spreadsheets will be allowed, but they will have to be combined with add-on software to meet HMRC’s requirements.

Welsh Land Transaction Tax introduced

From 1 April 2018, Land Transaction Tax (LTT) will replace Stamp Duty Land Tax (SDLT). LTT will be collected by the Welsh Revenue Authority (WRA). HMRC has published guidance on the introduction of the new tax and the way in which property transactions straddling 1 April 2018 and cross border transactions will be dealt with.

Property Taxes across the UK

From 22 November 2017, there is an exemption for first-time buyers from SDLT on the first £300,000 when buying a home, where the total price of the property is not more than £500,000. 5% is payable on purchases between £300,000 and £500,000. However, with devolved taxes, buying a property in Scotland and Wales can bring different tax consequences.

In Scotland, Land and Buildings Transaction Tax (LBTT) applies instead of SDLT. Therefore an LBTT relief for first-time buyers of properties up to £175,000 has been proposed in the Scottish Draft Budget 2018/19. This is subject to a government consultation before the relief launches in 2018/19.

Welsh first-time buyers benefit from first-time buyers SDLT relief until 31 March 2018. Land Transaction Tax (LTT) replaces SDLT in Wales from 1 April 2018. The starting rate for LTT will be £180,000, benefiting not just first-time buyers but other home buyers in Wales. A higher rate, of 3% over standard rates for additional residential properties, applies to purchases throughout the UK whether SDLT, LBTT or LTT applies. A new land-transaction-tax-calculator is available.

HMRC has issued guidance on the changes in Wales and the transitional rules for property transactions.

Income tax changes from 6 April 2018

The personal allowance for 2018/19 is £11,850. However, some individuals do not benefit from the full personal allowance. There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000, which is £1 for every £2 of income above £100,000. So for 2018/19 there is no personal allowance where adjusted net income exceeds £123,700.

The basic rate of tax is currently 20%. From 6 April 2018 the band of income taxable at this rate is £34,500 so that the threshold at which the 40% band applies is £46,350 for those who are entitled to the full personal allowance. Additional rate taxpayers pay tax at 45% on their income in excess of £150,000.

The tax on income (other than savings and dividend income) is different for taxpayers who are resident in Scotland to taxpayers resident elsewhere in the UK. The Scottish income tax rates and bands apply to income such as employment income, self-employed trade profits and property income.

In the 2018/19 Scottish Budget, the Finance and Constitution Secretary for Scotland, Derek Mackay announced significant changes to income tax bands and rates for Scottish resident taxpayers, introducing five possible income tax rates. The income tax rates range between 19% and 46%. Scottish taxpayers are entitled to the same personal allowance as individuals in the rest of the UK.

Scottish Bands £

Band name

Scottish Rate

0 – 2,000

Starter

19%

2,001 – 12,150

Basic

20%

12,151 – 31,580

Intermediate

21%

31,581 – 150,000

Higher

41%

Over 150,000

Top

46%

From April 2019, the National Assembly for Wales has the right to vary the rates of income tax payable by Welsh taxpayers.

Dividend allowance down to £2,000

In 2017/18 the first £5,000 of dividends are chargeable to tax at 0% (the Dividend Allowance). From 6 April 2018 the Dividend Allowance is reduced to £2,000. Dividends received above the allowance are taxed at the following rates:

He also made available further details on some consultations which are considered briefly below:

Making Tax Digital sanctions for late submission and late payment – Following significant support on consultation, the government intends to take forward points based late submission penalties. There will be further consultation on the draft legislation to be published in summer 2018.

Tackling the plastic problem – The government will call for evidence as to how changes to the tax system could be used to reduce the amount of single-use plastics that are wasted by reducing unnecessary production, increasing re-use and improving recycling. The government would also like to explore how to drive innovation in this area to achieve the same outcomes.

Cash and digital payments – The government will consult and seek evidence about how the role of digital payments is to fit into the growing digital economy. This will include identifying what further work can be done to remove barriers to digital payments. At the same time the government acknowledges that cash must remain accessible and secure.

Online platforms – The government has launched a call for evidence on the role of online platforms in ensuring tax compliance by their users. The types of online platforms the government is principally interested in are platforms that allow people to earn money from spare resources such as cars and spare rooms, that allow people to use their time to generate extra income and that connect buyers with individuals or businesses offering services or goods for sale. The government wants to ensure that, where people have tax obligations because of these activities, it is easy for them to comply.

VAT collection split payment – The government wants to combat online VAT fraud by harnessing new technology and is consulting on VAT split payment. This will utilise payments industry technology to collect VAT on online sales and transfer it directly to HMRC.

VAT registration threshold call for evidence – The government considers that the current design of the VAT registration threshold may be dis-incentivising small businesses from growing their business and improving their productivity.

Enews – March 2018

In this month’s Enews we report on National Minimum Wage and National Living Wage increases together with increases in auto enrolment pension contributions.

We also report on tax relief for Scottish taxpayers on pension contributions following the introduction of five income tax bands. With new advisory fuel rates and a tribunal ruling on the tax status of a BBC journalist, there is lots to update you on.

Article Index

Tribunal rules BBC journalist is caught by ‘IR35’ legislation

Advisory fuel rates for company cars

Scotland’s five income tax bands and tax relief for pensions

Minimum Wage increases

Pensions Auto Enrolment reaches a million employers

Year end tax planning

Tribunal rules BBC journalist is caught by ‘IR35’ legislation

A First Tier Tribunal has ruled that Christa Ackroyd who presented BBC news programme Look North and was paid via a personal service company was caught by the IR35 rules resulting in additional tax and national insurance contributions being payable.

The IR35 rules in broad terms mean that those working via a personal service company have to consider whether, if the services were provided by the individual contractor directly to the client, there would be a contract of employment.

The tribunal looked at lots of factors pertinent to Ms Ackroyd’s engagement and considered it significant that the BBC could control what work she did. She was engaged for seven years on effectively a full time basis.

Subject to any appeal and determination of final figures, the tax and NIC that Ms Ackroyd will be liable for amounts to around £420,000 before offset of corporation tax.

The IR35 rules were amended for Public Bodies (including the BBC) from April 2017 and the government has announced that it may make changes to the rules for the private sector as well in the future.

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which take effect from 1 March 2018. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 March 2018 are:

Scotland’s five income tax bands and tax relief for pensions

Following the announcement of new income tax rates for Scottish taxpayers for 2018/19, the government is looking at ways of addressing the issue of the tax relief due on Scottish taxpayers’ pension contributions.

Tax relief on pension contributions is a complex matter and depends on the marginal tax rate of the individual concerned and whether or not the contributions are being paid with relief at source or under net pay arrangements. The following link details how relief will be given for 2018/19. If you would like help in this complex area please contact us.

The income tax rates for Scottish taxpayers on income other than savings and dividend income are now expected to be as follows:

Scottish Bands £

Band name

Scottish Rate

0 – 2,000

Starter

19%

2,001 – 12,150

Basic

20%

12,151 – 31,580

Intermediate

21%

31,581 – 150,000

Higher

41%

Over 150,000

Top

46%

Scottish taxpayers are entitled to the same personal allowance as individuals in the rest of the UK which for 2018/19 is £11,850. The allowance is reduced by £1 for every £2 of adjusted net income in excess of £100,000. The bands and allowances are detailed in the P9X.

Minimum Wage increases

The National Minimum Wage (NMW) and National Living Wage (NLW) are the legal minimum wage rates that must be paid to employees. Employers are liable to be penalised for not complying with the NMW and NLW rules.

There are different levels of NMW and NLW, depending on age and whether the employee is an apprentice. The rates are due to increase from 1 April 2018 as shown in the following table:

Rate from 1 April 2017

Rate from 1 April 2018

NLW for workers aged 25 and over

£7.50

£7.83

NMW main rate for workers aged 21-24

£7.05

£7.38

NMW 18-20 rate

£5.60

£5.90

NMW 16-17 rate for workers above school leaving age but under 18

£4.05

£4.20

NMW apprentice rate *

£3.50

£3.70

*for apprentices under 19 or 19 or over and in the first year of their apprenticeship

There are no exemptions from paying the NMW on the grounds of the size of the business.

Pensions Auto Enrolment reaches a million employers

The Pensions Regulator has announced that the number of employers meeting their workplace pension duties has reached one million and that statistics show that approximately 9.3 million people are saving into a pension.

TPR’s Director of Automatic Enrolment, Darren Ryder, said:

‘I am delighted we have reached this important landmark, which shows how far we have come since the start of automatic enrolment.

By successfully meeting their responsibilities, employers have helped reverse the downward trend in workplace saving so that putting earnings into a pension has now become the norm.

The continued support of the pensions industry, including pension and payroll providers and business advisers has been crucial to the success of automatic enrolment. The industry has helped us ensure employers have the tools, information and services they need to comply with the law.

We are now focused on the challenges ahead so that employers continue to understand what they need to do so that staff receive the pensions they are entitled to.’

Minimum pension contributions are set to increase from 6 April 2018 and again in 2019.

Year end tax planning

With the end of the tax year looming there is still time to save tax for 2017/18. We have set out some points you may want to consider.

Make full use of your ISA allowance – ISAs can offer a useful tax free way to save, whether this is for your children’s future, a first home or another purpose. Individuals may invest up to a limit of £20,000 for the 2017/18 tax year. A saver may only pay into a maximum of one Cash ISA, one Stocks and Shares ISA and one Innovative Finance ISA per year. Savers have until 5 April 2018 to make their 2017/18 ISA investment.

Take advantage of capital allowances – By making the most of capital allowances, businesses may be able to write off the costs of capital assets against taxable profits. The Annual Investment Allowance allows businesses to claim a deduction of up to £200,000 of the year’s investment in plant and machinery (excluding cars). Businesses of any size and most business structures can make use of the AIA. However, there are provisions to prevent multiple claims.

Build a tax efficient retirement plan – Pension contributions must be paid on or before 5 April 2018 for them to be relieved against 2017/18 income. Annual contributions are limited to the greater of £3,600 (gross) or the amount of your UK relevant earnings may be eligible for tax relief. However, these will be subject to the annual allowance, which is generally £40,000. This is reduced for those whose income is above certain technical thresholds and has to be considered when both adjusted annual income is (their income plus both their own and their employer’s pension contributions) over £150,000 and ‘net’ income is at least £110,000. Net income broadly means an individual’s income less own gross pension contributions made. For every £2 of adjusted income over £150,000, a person’s annual allowance is reduced by £1 (down to a minimum of £10,000).

This is only a selection of options that you may wish to consider as part of your tax planning strategy. For more information, and for advice on how we can help you to minimise your tax bill, please contact us.

Enews – February 2018

In this month’s Enews we report on the roll out of Tax-free Childcare and the reduction in HMRC scam texts. We also consider the latest list of deductible subscriptions and rejected Self assessment expenses claims and excuses. With revised income tax bands for Scottish taxpayers there is lots to update you on.

Article Index

HMRC rejected Self Assessment expenses and excuses

Tax-free childcare roll out

HMRC halts thousands of scam text messages

Updated list of professional subscriptions

What will the Spring Statement bring?

Scotland revise income tax bands

HMRC rejected Self Assessment expenses and excuses

HMRC have released the latest list of imaginative excuses made by individuals who failed to submit their self assessment return by 31 January deadline in 2017. Excuses include alien sightings and being too busy touring with a one-man play.

HMRC’s annual list of outlandish excuses is used to publicise the self assessment deadline of 31 January following the end of the tax year. An automatic £100 penalty applies to those who have the obligation to complete a return and miss the filing deadline, regardless of whether the individual has a tax liability to pay or not.

Angela MacDonald, HMRC’s director general of customer services, said:

‘Each year we’re making it easier and more intuitive for our customers to complete their tax return, but each year we still come across some questionable excuses, whether that’s blaming a busy touring schedule or seeing aliens.’

Here are some of the recent excuses:

I couldn’t file my return on time as my wife has been seeing aliens and won’t let me enter the house.

I’ve been far too busy touring the country with my one-man play.

My ex-wife left my tax return upstairs, but I suffer from vertigo and can’t go upstairs to retrieve it.

My business doesn’t really do anything.

I spilt coffee on it.

HMRC have also released details of some of the weirdest expense claims which include:

A three-piece suite for my partner to sit on when I’m doing my accounts.

Tax-free childcare roll out

The implementation of Tax-Free Childcare, the new government scheme to help working parents with the cost of childcare, is being rolled out to eligible parents in stages.

The scheme first made its debut in April 2017 and although there have been initial systems problems, HMRC’s aim is to have the scheme open to all eligible parents by 14 February 2018. Application is made online through the Childcare Choices site www.childcarechoices.gov.uk and applications can be made for all eligible children at the same time.

Under Tax-Free Childcare, for every £8 the parent pays, the government provides a £2 top-up, to a maximum of £2,000 per child each year – with a higher limit of £4,000 for disabled children. This gives a total childcare pot of £10,000, or £20,000 for disabled children. To be eligible, parents must generally have minimum weekly earnings of at least £120 each. There is also an upper earnings limit of £100,000.

Compensation may be available in certain circumstances where a parent:

is unable to complete an application for Tax-Free Childcare

is unable to access their childcare account

or doesn’t get a decision about whether they are eligible, without explanation, for more than 20 days.

Those employing a nanny should be able to use the childcare account to pay their PAYE tax and National Insurance. Delays in getting this system working may also give grounds for compensation. Application is made online GOV.UK childcare-service-compensation

HMRC halts thousands of scam text messages

HMRC have announced that they have stopped thousands of taxpayers from receiving scam text messages ‘with 90 percent of the most convincing texts now halted before they reach their phones’.

HMRC’s press release states:

‘Fraudsters alleging to be from HMRC send text messages to unsuspecting members of the public. In these messages they will make false claims, such as suggesting they are due a tax rebate. Messages will usually include links to websites that harvest personal information or spread malware. This can in turn lead to identity fraud and the theft of people’s personal savings.’

HMRC have confirmed that they will never contact taxpayers who are due a tax refund by text message or by email.

HMRC’s Director of Customer Services, Angela MacDonald, said:

‘HMRC is focused on becoming the most digitally advanced tax authority in the world, and a big part of that relates to keeping our customers safe from online scammers.’

‘As email and website scams become less effective, fraudsters are increasingly turning to text messages to con taxpayers. But as these numbers show, we won’t rest until these criminals are out of avenues to exploit.’

‘We have made significant progress is cutting down these types of crime, but one of the most effective ways to tackle it is still to help the public spot the tell-tale signs of fraud.’

To read details of the measures taken by HMRC and other advice on spotting fraud visit the link below.

Updated list of professional subscriptions

Employees are allowed to claim tax relief on their annual professional fees or subscriptions to some HMRC approved professional organisations. The costs are tax deductible generally where the individual must have membership to do their job or it is helpful for their work. Where the fees are paid by the individual’s employer this will not generally result in a benefit in kind charge.

HMRC have updated the list of approved bodies which also includes not only details of the professional bodies that are approved but details of qualifying annual subscriptions for journals.

What will the Spring Statement bring?

We had two Budgets in 2017 and the Spring Statement is planned for Tuesday 13 March. The Chancellor Philip Hammond has previously stated that at the Spring Statement he will respond to the Office for Budget Responsibility forecast, consider longer-term tax challenges and start consultations on how they can be addressed. The government has the option to make immediate changes to tax policy at the Spring Statement if the economic circumstances require it.

The revised timetable of an Autumn Budget followed by a Spring Statement means changes to the legislative timetable which are set out in the link below.

We will keep you informed of pertinent Spring Statement announcements.

Scotland revise income tax bands

Derek Mackay, Scottish Finance Secretary, has made a change to the proposed Scottish income tax bands for 2018/19 which he announced in December 2017 in the Scottish Draft Budget.

The change is being made to ‘remove an anomaly that meant some higher rate taxpayers saw their bills fall while others on slightly lower incomes saw a rise, due in part to changes in the personal allowance’.

Scottish taxpayers income tax rates on income other than savings and dividend income are now expected to be as follows:

Scottish Bands

Band name

Scottish Rate

Over £11,850 – £13,850

Starter

19%

Over £13,850 – £24,000

Basic

20%

Over £24,000 – £43,430

Intermediate

21%

Over £43,430 – £150,000

Higher

41%

Over £150,000

Top

46%

Confirming the changes during the Stage 1 of the Budget debate, Mr Mackay said:

‘As a parliament of minorities, we must work across the chamber to find compromise and consensus in order to give support, sustainability and stimulus to our economy and to our public services …. Our changes to tax ensure Scotland has a progressive tax system – with 70% of taxpayers paying less next year than they do currently and 55% paying less than they would across the rest of the UK – while businesses benefit from support for investment.’

Enews – January 2018

In this month’s eNews we report on the government’s proposals on auto enrolment, the Scottish draft budget and their plans for five income tax rates and changes to Land and Buildings Transaction Tax. We also include an announcement from the Welsh Assembly on the proposals for Land Transaction Tax.

With details of an HMRC iTunes scam and the withdrawal of options to pay HMRC at the Post Office and via personal credit card there is lots to update you on.

Scottish Draft Budget

The Scottish government has the power to set the rates and bands of income tax (other than those for savings and dividend income) which apply to Scottish resident taxpayers.

Since 6 April 2016 the rates and bands of Scottish income tax have been frozen at 20% and the Scottish higher and Scottish additional rates at 40% and 45% respectively. For 2017/18 the higher rate threshold in Scotland is £43,000 whilst the threshold in the rest of the UK is £45,000. This means that a Scottish higher rate taxpayer will pay £400 more tax in 2017/18 than a UK higher rate taxpayer, being £2,000 at the marginal rate of 20%.

For 2018/19 the rates and tax bands applicable to Scottish taxpayers on non-savings and non dividend income will be as follows:

Scottish Bands

Band name

Scottish Rates

Over £11,850* – £13,850

Starter

19%

Over £13,850 – £24,000

Basic

20%

Over £24,000 – £44,273

Intermediate

21%

Over £44,273 – £150,000**

Higher

41%

Over £150,000**

Top

46%

* assuming the individual is entitled to a full UK personal allowance

** the personal allowance will be reduced if an individual’s adjusted net income is above £100,000. The allowance is reduced by £1 for every £2 of income over £100,000

The UK higher rate tax point for 2018/19 has been set at £46,350 (for those entitled to the full UK personal allowance) and the tax rates for non-savings and non-dividend income have been maintained at 20%, 40% and 45% respectively.

For 2018/19 Scottish taxpayers with employment income of £26,000 will pay the same amount of income tax as those with the similar income in the rest of the UK. For higher earners, with pay of £150,000, a Scottish taxpayer will pay an extra £1,770 of income tax than those on similar income in the rest of the UK.

Land and Buildings Transaction Tax and First-Time Buyer Relief

The Scottish government announced that they will introduce a new Land and Buildings Transaction Tax (LBTT) relief for first-time buyers of properties up to £175,000. The relief will raise the zero tax threshold for first-time buyers from £145,000 to £175,000, and according to the Scottish government 80% of first-time buyers in Scotland will pay no LBTT at all. The Scottish government also announced that first-time buyers buying a property above £175,000 will also benefit from the relief on the portion of the price below the threshold.

The Scottish government announced that they will launch a consultation on the policy before introducing the first-time buyer relief in 2018/19. The relief for first-time buyers paying Stamp Duty Land Tax on first homes in the rest of the UK was introduced from 22 November 2017.

Proposals to extend pensions auto enrolment to younger workers

The government has announced proposals to extend pensions auto enrolment to include younger workers and to amend the way in which contributions are calculated.

According to the press release:

‘The review’s recommendations, which will now be progressed and legislated for where necessary, will see:

automatic enrolment duties continuing to apply to all employers, regardless of sector and size

young people, from 18 years old, benefiting from automatic enrolment, introducing 900,000 young people into saving an additional £800 million through a workplace pension

workplace pension contributions calculated from the first pound earned, rather than from a lower earnings limit – this will bring an extra £2.6 billion into pension saving, improving incentives for people in multiple jobs to opt-in, and simplifying the way employers assess their workforces and calculate contributions

the earnings trigger remaining at £10,000 for 2018/19, subject to annual reviews

contribution levels reviewed after the implementation of the 8% contribution rate in 2019

the government testing a series of ‘targeted interventions’ – including through opportunities to work with organisations who act as ‘touch points’ for the 4.8 million self-employed people, such as banks and those who contract labour – to explore how technology can be used to increase their pension saving.’

Under auto enrolment, employers are required to automatically enrol all eligible workers (generally employees) into a workplace pension scheme and pay a minimum contribution into their pension. Employees do, however, have the right to opt out of auto enrolment.

Currently workers who are aged between 22 and the State Pension Age with earnings of £10,000 per annum are eligible to be auto enrolled. Younger employees and those who do not meet the minimum income requirement can opt to make pension contributions.

The government plan to reduce the lower age limit to 18 by the mid 2020s, in order to encourage younger workers to get into ‘the habit of saving’.

David Gaulke, Work and Pensions Secretary said:

‘We are committed to enabling more people to save while they are working, so that they can enjoy greater financial security when they retire. We know the world of work is changing, so it is only right that pension saving does too. This ambitious package will see more people than ever before helped onto the path towards building a secure retirement.’

Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), stated:

‘Requiring employers to contribute from the first pound of earnings will mean that, by 2019, hundreds of thousands of small employers will have to pay up to £180 more per employee each year. ‘For employers in certain sectors, such as care and hospitality where margins are tight, this will really add up.’

Paying HMRC? Not at the post office or by credit card

With many individuals having tax payments to make at the end of this month it is important to be aware that HMRC have announced that they will no longer accept payments made at the Post Office or by credit card.

HMRC have announced that with effect from 15 December 2017 it will no longer be possible to make payments to HMRC at a post office. The reason for this change is that contract with Santander, which allowed this method of payment, has expired. HMRC are advising that where electronic payment is not possible, payments can still be made at bank branches using a payslip and payments for self assessment income tax can still be posted to HMRC.

From 13 January 2018 it will no longer be possible to pay HMRC using a personal credit card. The timing of this change coincides with the date from which HMRC will no longer be permitted to charge fees for payment by credit card.

HMRC warning about iTunes gift card scam

HMRC are urging people to stay safe from a phone scam that is conning elderly and vulnerable people out of thousands of pounds.

The scammers are preying on victims by cold calling them and impersonating an HMRC member of staff. They advise the victim that they owe a large amount of tax which they can only pay off by digital vouchers and gift cards, including Apple’s iTunes vouchers.

The scam victims are told to go to a local shop, to purchase vouchers, and then read out the redemption codes to the scammer. The conmen then sell on the codes or purchase high value products, all at the victim’s expense.

According to HMRC the scammers frequently use intimidation to get what they want, threatening to seize the victim’s property or involve the police. The use of vouchers is an attractive scam as they are easy to sell on and hard to trace once used.

HMRC have confirmed that they would never request the settling of debt through such a method.

According to figures from Action Fraud, the UK’s national fraud reporting centre, between the beginning of 2016 and August this year there have been over 1,500 reports of this scam, with the numbers increasing in recent months. The vast majority of the victims are aged over 65 and suffered an average financial loss of £1,150 each.

HMRC is working closely with law enforcement agencies, Apple and campaign groups to make sure the public know how to spot the scam and who to report it to.

HMRC’s Director General of Customer Services, Angela MacDonald, said:

‘These scammers are very confident, convincing and utterly ruthless. We don’t want to see anyone fall victim to this scam just before Christmas. That’s why we’re working closely with crime fighters to ensure taxpayers know how to avoid it.

These scams often prey on vulnerable people. We urge people with elderly relatives to warn them about this scam and remind them that they should never trust anyone who phones them out of the blue and asks them to pay a tax bill. If you think you’ve been a victim you should contact Action Fraud immediately.’

Enews – December 2017

In this month’s eNews we report on pertinent Budget announcements. We also report on the advisory fuel rates for company cars, rules for tax free Christmas gifts for employees and the roll out of Tax free childcare. With changes to the deadline for the Trusts Registration Service, delays to the abolition of Class 2 NICs and increased workplace pension contributions on the horizon there is lots to consider.

Please do get in touch if you would like any further guidance on any of the areas covered.

Article Index

Autumn Budget 2017

Employee gifts – tax free?

Advisory fuel rates for company cars

Pension contribution increases and temporary staff

Delay to roll out of Tax free childcare

Trusts Registration Service

Delay in the abolition of Class 2 NIC

Autumn Budget 2017

The Chancellor Philip Hammond presented his first Autumn Budget on Wednesday 22 November 2017. Some of the key announcements are set out below.

Increased limits for knowledge-intensive companies

The government will legislate to encourage more investment in knowledge-intensive companies under the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs). The government will:

double the limit on the amount an individual may invest under the EIS in a tax year to £2 million from the current limit of £1 million, provided any amount over £1 million is invested in one or more knowledge-intensive companies

raise the annual investment limit for knowledge-intensive companies receiving investments under the EIS and from VCTs to £10 million from the current limit of £5 million. The lifetime limit will remain the same at £20 million, and

allow knowledge-intensive companies to use the date when their annual turnover first exceeds £200,000 in determining the start of the initial investing period under the permitted maximum age rules, instead of the date of the first commercial sale.

The changes will have effect from 6 April 2018. This measure is subject to
normal state aid rules.

Proposed changes to Entrepreneurs’ Relief

The government will consult on how access to ER might be given to those whose holding in their company is reduced below the normal 5% qualifying level as a result of raising funds for commercial purposes by means of issues of new shares thus diluting their holding. Allowing ER in these circumstances would incentivise entrepreneurs to remain involved in their businesses after receiving external investment.

This proposal is welcome and addresses a particular problem which can arise. ER broadly requires a holding of 5% of the ordinary share capital. It may be that significant external investment is made which would reduce the holding to below 5%.

Improving Research and Development (R&D)

A number of measures have been announced to support business investment in R&D including:

an increase in the rate of the R&D expenditure credit which applies to the large company scheme from 11% to 12% where expenditure is incurred on or after 1 January 2018

a pilot for a new Advanced Clearance service for R&D expenditure credit claims to provide a pre-filing agreement for three years

a campaign to increase awareness of eligibility for R&D tax credits among SMEs

working with businesses that develop and use key emerging technologies to ensure that there are no barriers to them claiming R&D tax credits.

Business rates

Business rates have been devolved to Scotland, Northern Ireland and Wales. The business rates revaluation took effect in England from April 2017 and resulted in significant changes to the amount of rates that businesses will pay. In light of the recent rise in inflation, the government will provide further support to businesses including:

bringing forward the planned switch in indexation from RPI to CPI to 1 April 2018

legislating retrospectively to address the so-called ‘staircase tax’. Affected businesses will be able to ask the Valuation Office Agency to recalculate valuations so that bills are based on previous practice backdated to April 2010.

SDLT relief for first time buyers

The government has announced that first time buyers paying £300,000 or less for a residential property will pay no Stamp Duty Land Tax.

First time buyers paying between £300,000 and £500,000 will pay SDLT at 5% on the amount of the purchase price in excess of £300,000. First time buyers purchasing property for more than £500,000 will not be entitled to any relief and will pay SDLT at the normal rates.

The new rules apply to transactions with an effective date (usually the date of completion) on or after 22 November 2017. This measure does not apply in Scotland as this is a devolved tax. This measure will apply in Wales until 1 April 2018, when SDLT will be devolved to Wales.

Business rates

Business rates have been devolved to Scotland, Northern Ireland and Wales. The business rates revaluation took effect in England from April 2017 and resulted in significant changes to the amount of rates that businesses will pay. In light of the recent rise in inflation, the government will provide further support to businesses including:

bringing forward the planned switch in indexation from RPI to CPI to 1 April 2018

legislating retrospectively to address the so-called ‘staircase tax’. Affected businesses will be able to ask the Valuation Office Agency to recalculate valuations so that bills are based on previous practice backdated to April 2010.

For advice on how the Autumn Budget announcements will affect you and your business contact us.

Employee gifts – tax free?

At this time of year some employers may wish to make small gifts to their employees.

A tax exemption is available which should give employers certainty that the benefits provided are exempt and do not result in a reportable employee benefit in kind. In order for the benefit to be exempt it must satisfy the following conditions:

the cost of providing the benefit does not exceed £50 per employee (or on average when gifts made to multiple employees)

the benefit is not cash or a cash voucher

the employee is not entitled to the voucher as part of a contractual arrangement (including salary sacrifice)

the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties

where the employer is a ‘close’ company and the benefit is provided to an individual who is a director, an office holder or a member of their household or their family, then the exemption is capped at a total cost of £300 in a tax year.

If any of these conditions are not met then the benefit will be taxed in the normal way subject to any other exemptions or allowable deductions.

One of the main conditions is that the cost of the benefit does not exceed £50. If the cost is above £50 the full amount is taxable, not just the excess over £50.The cost of providing the benefit to each employee and not the overall cost to the employer determines whether the benefit can be treated as a trivial benefit. So, a benefit costing up to £50 per employee whether provided to one or more employees can be treated as trivial. Where the individual cost for each employee cannot be established, an average could be used. Some HMRC examples consider gifts of turkeys, a bottle of wine or alternative gift voucher.

Further details on how the exemption will work, including family member situations, are contained in HMRC manual.

However if you are unsure please do get in touch before assuming the gift you are about to provide is covered by the exemption.

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 December 2017. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 December 2017 are:

Pension contribution increases and temporary staff

The Pensions Regulator is reminding employers that they need to comply with their auto enrolment duties.

Automatic enrolment still applies to temporary staff this Christmas

With the festive season fast approaching, employers may be planning to take on temporary staff to help their business survive the rush. Automatic enrolment applies to these employees in the same way as permanent employees, even if they will only be working for a short time.

Employers will still need to assess temporary staff and auto enrol any eligible employees into a qualifying pension scheme. Once auto enrolled both the employer and employee must make pension contributions.

It is possible to apply postponement to temporary employees, which has the effect of delaying some of the auto enrolment duties, but TPR are warning this must be dealt with correctly.

Are you ready to increase contributions?

TPR are reminding employers that they need to be ready to deal with the increased auto enrolment pension contributions which apply from April 2018. Employers and their employees need to be aware of how the changes will affect them, including checking that the employer’s payroll software is compatible.

Guidance is included on TPR website on this issue. From 6 April 2018, the minimum contributions employers and staff pay into their automatic enrolment pension goes up to 2% for employers and 3% for employees. This increase has been planned since automatic enrolment started. Further increases in rates are scheduled for April 2019.

Please contact us if you would like any help with auto enrolment duties.

Delay to roll out of Tax free childcare

The government have announced a delay to the roll out of tax free childcare which was expected to be fully implemented by the end of the year. From 24 November 2017 the service is available to parents whose youngest child is under 6 or who has their 6th birthday on that day. Parents can apply online through the childcare service which can be accessed via the Childcare Choices website.

In April 2017, HMRC started rolling out the childcare service via a single website through which parents can apply for both 30 hours free childcare and Tax-Free Childcare. The roll out started with parents of the youngest children first. HMRC acknowledge that over the summer some parents didn’t receive the intended level of service when using the website and that they have subsequently made significant improvements. For those parents who have had difficulties in accessing the service, compensation may be available: see childcare service compensation.

Over the coming months, HMRC will gradually open the childcare service to parents of older children, whilst continuing to make further improvements to the system. HMRC hope this strategy of managing the volume of applications will result in prompt eligibility responses when parents apply, with ‘almost all parents receiving a response within five working days, and most getting their decision instantly’.

All eligible parents will be able to apply by the end of March 2018. Parents will be able to apply for all their children at the same time, when their youngest child becomes eligible.

Tax-Free Childcare is the new government scheme to help working parents, both employed and self employed, with the cost of childcare. For every £8 a parent pays in, the government will pay in an extra £2. Parents can receive up to £2,000 per child, per year, towards their childcare costs making a total amount of £10,000. Higher limits of £4,000 and £20,000 apply for disabled children.

To qualify for Tax-Free Childcare parents and partners in the household must generally meet a minimum income level of on average £120 a week and each earn less than £100,000 a year.

The scheme will eventually be available for children up to the age of 12, or 17 for children with disabilities. Those eligible will be able to apply for all their children at the same time.

Employer Supported Childcare, usually by way of childcare vouchers, will remain open to new entrants until April 2018 to support the transition between the schemes and it will continue to be available for current members if they wish to remain in it or they can switch to the new scheme. It is not possible to benefit from both Employer Supported Childcare and Tax Free Childcare at the same time.

Trusts Registration Service

HMRC have launched a new Trusts Registration Service (TRS), so that trustees can register their trust online and provide information on the beneficial owners of the trust. The new service launched in early July for trustees and replaces the 41G (Trust) paper form, which was withdrawn at the end of April.

Under the existing self assessment rules, the trustees (or their agents) must register details of a trust with HMRC by 5 October of the year after a liability to Income Tax or Capital Gains Tax (CGT) first arises. The registration process, which will need completing via TRS, includes providing information about the beneficiaries of the trust.

In subsequent years, or where the trust is already registered for self assessment, the trustees (or their agent) of either a UK or non-UK trust that incurs a UK tax liability are required to provide beneficial ownership information about the trust, using the TRS, by 31 January following the end of the tax year.

HMRC have advised that agents will be able to register on behalf of trustees from October 2017 and agents and lead trustees can enter updates for changes of circumstances from early 2018.

HMRC have also confirmed that in this first year of TRS there will be no penalty imposed where registration is completed by 5 January 2018 for trusts whose first tax assessment year is 2016/17.

A Self Assessment Trust and Estate Tax Return (SA900) must still be submitted after the end of each tax year, reporting any income and gains. A TRS update is required each year in parallel with income tax returns; however an update is also required when any tax charge arises for example IHT principal charges or SDLT.

From 17 November 2017 the method of registering a trust has been simplified such that an agent can access TRS directly rather than email HMRC for approval to access.

Delay in the abolition of Class 2 NIC

The government has announced that it will introduce legislation, to abolish Class 2 national insurance contributions (NIC) and to make further proposed NIC changes in 2018.

The measures the legislation will implement, will now take effect one year later than previously announced, from April 2019. These measures include the abolition of Class 2 NIC paid by self employed individuals, reforms to the Class 1A NIC treatment of termination payments (the £30,000 rule) and changes to the NICs treatment of sporting testimonials.

On 2 November 2017 the Government announced a one year delay to the abolition of Class 2 NICs. Class 2 NICs will now be abolished from 6 April 2019 rather than 6 April 2018.

The government have stated that ‘the delay will allow time for the government to engage with interested parties and Parliamentarians with concerns relating to the impact of the abolition of Class 2 NICs on self-employed individuals with low profits’.

Enews – November 2017

In this month’s eNews we report on Budget announcements and the introduction of new taxes in Wales and Scotland of Land Transaction Tax and Air Departure Tax. We also consider HMRC’s new method of Simple Assessment for certain taxpayers, the Criminal Finances Act, proposals for Help to Save Accounts and new guidance for employers.

Article Index

Autumn Budget wishlist

Simple Assessment

Welsh Land Transaction Tax

Scottish Budget proposals

Criminal Finances Act

Help to Save Accounts

New guidance for employers

Autumn Budget wishlist

With the Chancellor’s first Autumn Budget due to be presented on 22 November, professional bodies and business groups are setting out their Budget wishlists. Recommendations include changes to Business Rates, a ‘Brexit ready’ Budget, incentives for business and an appeal for changes to the Apprenticeship Levy. The ICAEW is urging that the government give sufficient attention to Making Tax Digital to ensure a successful roll out and making the necessary changes to accommodate Brexit.

Meanwhile, the Federation of Small Businesses (FSB) has urged Philip Hammond to deliver a ‘Brexit-ready’ Budget, which rules out any new business tax increases and maintains investment incentives.

Simple Assessment

HMRC have changed the way in which they will assess some taxpayers removing the need for these individuals to complete a Self Assessment Tax Return. These changes took effect from September 2017.

The affected taxpayers fall into one of two categories:

new state pensioners with income more than the personal tax allowance (£11,000) in 2016/17; and

employees or pensioners with PAYE tax codes who have underpaid tax and who cannot have that tax collected through their tax code because it is too high to code out.

HMRC have also confirmed that all existing state pensioners who complete a tax return because their state pension is more than their personal allowance will be removed from self assessment in 2017/18. This may mean that some clients are dropped out of self assessment and issued an assessment instead based on the information which HMRC hold. Of course, whether the assessment is actually correct will be a different matter.

HMRC state:

‘HMRC will write to customers from September 2017 with a tax calculation. This could be a P800 or a Simple Assessment letter (PA302).

The letter will show their:

income from pay

pensions

state benefits

savings interest

employee benefits.

Customers just need to check the information is correct, and if it is they can pay their bill online or by cheque by the deadline in the letter.

If a customer thinks any information is incorrect they have 60 days to contact HMRC. For instance, if they think amounts used are wrong or HMRC didn’t act on information received.

Should customers miss the deadline they should contact HMRC to discuss their circumstances or financial penalties will be applied in line with current policy.

If customers are not happy with the follow-up response from HMRC, they have 30 days to appeal against the decision.’

If you would like help with your personal tax affairs please get in touch.

Welsh Land Transaction Tax

The Welsh Assembly has announced the proposed rates and bands for land transaction tax (LTT) which is to be introduced for land and property in Wales on 1 April 2018, replacing Stamp Duty Land Tax.

Under the new rates for LTT, Wales will have the highest starting threshold for the property tax in the UK. The proposed rates are as follows:

Residential

Non-residential

0%

£0 – £150,000

£0 – £150,000

0%

2.5%

£150,001 – £250,000

£150,001 – £250,000

1%

5%

£250,001 – £400,000

£250,001 – £1m

5%

7.5%

£400,001 – £750,000

£1m plus

6%

10%

£750,001 – £1.5m

12%

£1.5m-plus

Announcing the rates and bands, Professor Mark Drakeford, Cabinet Secretary for Finance and Local Government, said:

‘From April, Wales will introduce the first Welsh taxes in almost 800 years, supporting first-time buyers and boosting business.

The devolution of tax powers provides us with the opportunity to reshape and make changes to improve existing taxes to better meet Wales’ needs and priorities. I have always been clear that we will use these powers to help improve fairness and support jobs and economic growth in Wales.

These new progressive rates and bands for land transaction tax and landfill disposals tax will make a real difference to people’s lives; help change behaviours and deliver improvements to communities across Wales. We are being bold but balanced and leading the way in creating a fair and progressive tax system.’

Scottish Budget proposals

On 14 December, the Scottish Budget will set out the Scottish Government’s financial and tax plans.

Currently taxpayers who are resident in Scotland pay income tax on their non-savings and non-dividend income at rates and thresholds determined by the Scottish Government. Scottish higher and additional rate taxpayers may pay more income tax than those with similar income in the rest of the UK. The Scottish Parliament is considering plans to radically revise the bands and possibly to introduce some further income tax rates so that middle and higher earners pay additional tax.

The Scottish Parliament are also expected to announce the details of Air Departure Tax which takes effect for flights from Scotland from April 2018.

Criminal Finances Act

The Criminal Finances Act 2017 took effect on 30 September 2017. It makes companies and partnerships, a ‘relevant body’, criminally liable if they fail to prevent the facilitation of tax evasion being carried out by an employee, anyone acting on their behalf or someone acting as an agent. If found guilty, the business could face unlimited fines and potentially further consequential sanctions within their industry or profession.

This Act has the effect of creating an offence at corporate and partnership level which does not require the directors/partners to have had any knowledge of the offence in question. Broadly, the offence is the failure to prevent the crimes of those who act for or on behalf of the corporate body or partnership instead of the need to attribute criminal acts to that body.

For a firm to be criminally liable under the new Act, there are three elements of the offence:

There must be the execution of a criminal act of tax evasion.

The crime must have been facilitated or carried out by a person associated with a relevant body.

The relevant body failed to initiate adequate prevention procedures in relation to the act carried out by the associated person.

A defence is available when it can be shown that ‘reasonable prevention procedures’ were in place to prevent the associated person from committing or facilitating the crime; or that it would have been unreasonable or disproportionate to expect such procedures to be in place.

The government advises that any reasonable prevention procedures should be based on six guiding principles:

Risk assessment – the relevant body should assess the nature and extent of its exposure to the risk of an associated person committing a criminal act;

Proportionality – the procedures should take into account the nature, scale and complexity of the relevant body’s activities;

Top level commitment – the management of the relevant body should be committed to preventing illegal acts and should foster a culture that tax evasion and its facilitation is never acceptable;

Due Diligence – with appropriate procedures put in place with respect to all people who perform services for the relevant body;

Communication – training staff and ensuring the message effectively gets across to all employees and agents;

Monitoring and reviewing – ensuring that whatever procedures are put into place are regularly reviewed and updated and amended where necessary.

Help to Save Accounts

The government have announced details of a new Help to Save saving scheme. The scheme is government backed and designed to support working people on low incomes build up their savings.

The scheme, administered by HMRC, will be open to working people who receive Working Tax Credits, and those who receive Universal Credit with a household income equivalent to at least 16 hours a week at the national living wage (currently £120 a week).

Over a four year period, savers can deposit up to £50 per month.

At the end of two years, savers will get a 50% bonus based on the highest balance achieved. Savers can then carry on saving for another two years and get another 50% bonus on their additional savings.

Over four years those saving the maximum amount of £2,400 will receive bonuses of £1,200.

Money paid into the account can be withdrawn at any time but will affect the final bonus payment.

The government has confirmed that all transactions, including checking the balance and paying in savings, will be managed in an online account available through GOV.UK and that further information will be available from early 2018.

New guidance for employers

HMRC have issued the October 2017 Employer Bulletin which contains a number of articles relevant to employers on payroll related issues.

HMRC are advising that following the changes to the valuation of benefits in kind (BiK) where there is a cash option available, they will consult and then issue the necessary amendments to the PAYE Regulations. The guidance will also clarify the taxable amounts that need to be reported under Optional Remuneration and salary sacrifice arrangements.

Where a BiK is taken rather than the alternative cash option, the taxable value of the benefit is the higher of the cash foregone or the taxable value under the normal BiK rules. Transitional provisions apply for arrangements entered into before 6 April 2017.

The Bulletin also includes articles on:

Changes to Business Tax Account for employers, including new data on the Apprenticeship Levy and the introduction of monthly and annual statement pages

Data matters – ensuring RTI returns are submitted on or before the date the wages are paid, that the returns are accurate, cover all employees, including those that earn less than the National Insurance lower earnings limit

Paying HMRC at the Post Office – via transcash. This option will be withdrawn from 15 December 2017

Enews – October 2017

In this month’s eNews we update you on the latest government announcements on Making Tax Digital for Business (MTDfB). We also include the announcement of the Budget dates by Philip Hammond and Derek Mackay. With HMRC offering a new support service for growing businesses, a new Trusts Registration Service, updated phishing guidance and the ‘paper’ tax return deadline looming, there is lots to consider.

Article Index

Making Tax Digital for VAT

Budget on Wednesday 22 November and 14 December

Deadline for ‘paper’ self assessment tax returns

HMRC offer tax support to growing businesses

Trusts Registration Service

HMRC phishing and scam advice

Making Tax Digital for VAT

The government have issued information on how Making Tax Digital for Business (MTDfB) is expected to work for VAT once the rules are introduced in April 2019.

Under the proposed rules, which have been issued subject to consultation, VAT registered businesses with turnover over the VAT registration threshold will be required to submit their VAT return digitally using software. Businesses with a turnover above the VAT threshold (currently £85,000) will have to:

This software will either be a software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API). The functions of the compatible software include:

keeping records in a specified digital form

preserving digital records in a specified digital form

creating a VAT return from the digital records and providing HMRC with this information digitally

providing HMRC with VAT data on a voluntary basis and

receiving information from HMRC via the API platform that the business has complied.

Businesses will need to preserve digital records in the software for up to six years. Further information on the required information can be found in Annex 1

The government will make the final detailed requirements available to the software providers by April 2018 to allow time for the software to be developed and tested prior to the rules coming into effect from April 2019.

VAT is the first tax to be reportable under MTD and businesses within the scope of MTD will need to keep their records digitally, using approved MTD functional compatible software, from 1 April 2019. The software will create the return from the digital records and this will need to be submitted under MTD for return periods starting on or after 1 April 2019.

We will keep you informed of developments in this area and ensure we are ready to deal with the new requirements. Please contact us for more information.

Budget on Wednesday 22 November and 14 December

Chancellor Philip Hammond has announced that he will deliver the Autumn Budget on Wednesday 22 November.

The Autumn Budget will be the second Budget to be delivered this year, and will outline the government’s proposed tax changes and spending plans in response to forecasts from the Office for Budget Responsibility (OBR). The 2017 Autumn Budget will be the first of its kind under the government’s new fiscal timetable. During the 2016 Autumn Statement, the Chancellor announced that the annual Budget will now take place in the Autumn, as opposed to Spring.

Going forward Philip Hammond will make a Spring Statement each year, responding to a forecast produced by the OBR. The first Spring Statement will be delivered in 2018.

Meanwhile Finance Secretary Derek Mackay has confirmed the Scottish Draft Budget 2018/19 will be published on 14 December, three weeks after the Budget for the rest of the United Kingdom.

We will update you on pertinent announcements from the Autumn Budget and Scottish Budget in due course.

Deadline for ‘paper’ self assessment tax returns

For those individuals who have previously submitted ‘paper’ self assessment tax returns the deadline for the 2016/17 return is 31 October 2017. Returns submitted after that date must be submitted electronically or they will incur a minimum penalty of £100. The penalty applies even when there is no tax to pay or the tax is paid on time.

If you would like any help with the completion of your return please do get in touch.

HMRC offer tax support to growing businesses

HMRC have announced the introduction of a new service to directly help mid-sized businesses as they expand and grow. This is to be known as the Growth Support Service.

According to HMRC there are approximately 170,000 mid-sized businesses registered in the UK. The businesses with either a turnover of more than £10 million or more than 20 employees, that are undergoing significant growth, can now seek help from HMRC to access the services they need.

The Financial Secretary to the Treasury Mel Stride said:

‘Mid-sized businesses make vital contribution to the UK economy and I want to see them grow, succeed and prosper.

The Growth Support Service will help these expanding businesses access tailored tax assistance so that tax administration doesn’t stand in the way of their growth and ensures businesses can focus on finding new opportunities.

Businesses who meet the eligibility requirements can apply online; they will then be contacted by their dedicated growth support specialist at HMRC, to discuss their requirements. The bespoke service will generally last between three to six months.’

Trusts Registration Service

HMRC have launched a new Trusts Registration Service (TRS), so that trustees can register their trust online and provide information on the beneficial owners of the trust. The new service launched in early July for trustees and replaces the 41G (Trust) paper form, which was withdrawn at the end of April.

Under the existing self assessment rules, the trustees (or their agents) must register details of a trust with HMRC by 5 October of the year after a liability to Income Tax or Capital Gains Tax (CGT) first arises. The registration process, which will need completing via TRS, includes providing information about the beneficial owners of the trust.

In subsequent years, or where the trust is already registered for self assessment, the trustees (or their agent) of either a UK or non-UK trust that incurs a UK tax liability are required to provide beneficial ownership information about the trust, using the TRS, by 31 January following the end of the tax year.

The new service is not currently available to agents. HMRC have advised that agents will be able to register on behalf of trustees from October 2017 and agents and lead trustees can enter updates for changes of circumstances from early 2018.

HMRC have also confirmed that in this first year of TRS there will be no penalty imposed where registration is completed after 5 October but before 5 December 2017.

A Self Assessment Trust and Estate Tax Return (SA900) must still be submitted after the end of each tax year, reporting any income and gains.

HMRC phishing and scam advice

HMRC have updated their list of examples of websites, emails, letters, text messages and phone calls used by scammers and fraudsters to obtain individual’s personal information.
The guidance can be used to help you decide if a contact from HMRC is genuine, this guidance provides examples of the different methods that fraudsters use to get individuals to disclose personal information.

You can also read about how to recognise genuine contact from HMRC, and how to tell when an email is phishing/bogus.

Enews – September 2017

In this month’s eNews we update you on the new General Data Protection Regulation and guidance from the Pensions Regulator on auto enrolment compliance changes. We also include updated fuel advisory rates, the latest guidance from HMRC on employer issues and the compensation service available for those affected by problems with the implementation of Tax-Free Childcare.

Get ready for the newdataprotection rules

The government is to introduce new data protection rules under the General Data Protection Regulation (GDPR) which takes effect from 25 May 2018.

Under the GDPR businesses will have increased obligations to safeguard the personal information of individuals which is stored by the business. These rules apply to the information of customers, suppliers or employees. Generally for those who are currently caught by the Data Protection Act it is likely that you will have to comply with the GDPR.

GDPR will apply to data ‘controllers’ and ‘processors.’ Processing is about the more technical end of operations, like storing, retrieving and erasing data, whilst controlling data involves its manipulation in terms of interpretation, or decision making based on the data. The data processor processes personal data on behalf of a data controller. Obligations for processors are a new requirement under the GDPR.

The GDPR applies to personal data which is wider than under the Data Protection Act (DPA).

One key change to the current DPA rules is that those affected will have to show howthey have complied with the rules. Proof of staff training and reviewing HR policies are examples of compliance.

Under GDPR, higher standards are set for consent. Consent means offering people genuine choice and control over how their data is used.

Overall, the aims of GDPR are to create a minimal data security risk environment, and to protect personal data to rigorous standards. For most organisations, this will entail time and energy getting up to speed with compliance procedures. Reviewing consent mechanisms already in place is likely to be a key priority. In practice, this means things like ensuring active opt-in, rather than offering pre-ticked opt-in boxes, which become invalid under the new rules.

Organisations will also have to think about existing DPA consents. The ICO’s advice is that:

‘You should review how you seek, record and manage consent and whether you need to make any changes. Refresh existing consents now if they don’t meet the GDPR standard.’

Where the current consents do not meet the new GDPR then action will be needed.

The fines for non compliance are severe at up to 20 million euros or 4% of total worldwide annual turnover (if higher).

The Information Commissioner’s Office (ICO) has published some very useful information and a 12 step planning guide to help organisations get ready ahead of the May 2018 deadline.

Article Index

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 September 2017. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 September 2017 are:

Pensions Auto enrolment compliance

The Pensions Regulator (TPR) has begun carrying out employer spot checks to make sure employers are complying with their automatic enrolment duties and that they are giving their staff the workplace pensions they’re entitled to. According to the TPR these inspections help them to understand any challenges employers are facing, and whether TPR need to make any changes to their guidance. This also enables them to identify employers who fail to meet their duties, and take enforcement action where necessary.

TPR have confirmed that they will continue with their checks over the coming months generally sending a statutory notice to the employers they have selected ahead of their visits.

Get the process right

TPR are concerned that some employers are not following the correct procedures and during the course of their inspections have seen a number of instances of employers agreeing to opt staff out of a workplace pension before they have been enrolled. This is not in accordance with the auto enrolment rules. According to TPR:

‘Some employers claimed they were unaware as to the formality of their duties or process they needed to follow, and had simply been trying to do their staff a favour by offering them the option of opting out up front. But whether their motivation was genuine, or whether they were simply trying to get out of paying their staff the pension contributions they were due, the result was the same – they were in breach of their legal duties. Eligible staff need to be enrolled first, and can then opt out. One of the cornerstones of automatic enrolment is capitalising on inertia, and it has proved very successful so far in helping people who might never have saved for retirement before.’

Auto enrolment for new employers

Under pensions auto enrolment employers have to enrol qualifying employees into a workplace pension. Duties include paying contributions for the employee. The process of auto enrolment has been phased in from October 2012 when the largest employers had to comply with the rules. However the rules are set to change and new employers will have to comply with their automatic enrolment legal duties, as soon as they employ their first member of staff.

TPR guidance to advisers states:

‘If your client becomes an employer for the first time on or after 1 October 2017, they will immediately have legal duties for their new member of staff. These duties apply from the first day the first member of staff started working for your client. This is known as their duties start date.

Your client must comply with their duties straight away.’

In contrast to the above rule an employer who first pays an employee from 2 April 2017 onwards will have a staging date of January or February 2018 depending on when the first employee was paid.

Employers are generally able to postpone some of their auto enrolment duties for up to three months but this needs to be dealt with correctly.

Childcare Services compensation

The government are offering compensation to those who have been affected by problems with the implementation of Tax-Free Childcare.

Individuals who have been affected may be able to get a government top-up as a one-off payment for Tax-Free Childcare. The government will also consider refunding any reasonable costs directly caused by the service not working as it should, mistakes or unreasonable delays.

The government are advising that individuals may be eligible for these payments if they have:

been unable to complete their application for Tax-Free Childcare

been unable to access their childcare account

not received a decision about whether they are eligible, without explanation, for more than 20 days.

Tax-Free Childcare is the new government scheme to help working parents with the cost of childcare. The scheme launched at the end of April and is being rolled out to parents, starting with those parents with the youngest children first.

For every £8 a parent pays in, the government will pay in an extra £2. Parents can receive up to £2,000 per child, per year, towards their childcare costs making a total amount of £10,000. Higher limits of £4,000 and £20,000 apply for disabled children.

To qualify for Tax-Free Childcare parents and partners in the household must generally meet a minimum income level of on average £120 a week and each earn less than £100,000 a year.

The scheme will be available for children up to the age of 12, or 17 for children with disabilities. All eligible parents will be able to join the scheme by the end of 2017. Those eligible will be able to apply for all their children at the same time although the government rollout will start with the youngest children first. Parents will need to open an online account, which they can use to pay for childcare from a registered provider.

For those employers who currently offer Employer Supported Childcare, usually in the form of childcare vouchers, these schemes can remain open to new entrants until April 2018. Existing members have the option to remain in their existing scheme or change over to Tax-Free childcare as their child becomes eligible. It is not possible to benefit from tax-free childcare and employer supported childcare at the same time.

A calculator for parents comparing the options and guidance on the other government provided childcare are available on GOV.UK.

Enews – August 2017

In this month’s eNews we update you on the latest developments in Making Tax Digital together with an update on the Taylor Review and the latest employment and pensions auto enrolment statistics. We also report on the new Fundraising Preference Service and how to spot scam HMRC emails.

Article Index

New timetable for Making Tax Digital

Taylor Review of employment practices

Automatic enrolment reaches 8 million

Latest labour market statistics

HMRC genuine and phishing/bogus emails and calls

Charities bound by new Fundraising Preference Service

New timetable for Making Tax Digital

The government has announced a revised timetable for the introduction of Making Tax Digital for Business (MTDfB).

MTDfB introduces extensive changes to how taxpayers record and report income to HMRC. Unincorporated businesses, including landlords, were expected to be the first to see significant changes in the recording and submission of business transactions but the government has announced a delay to the implementation of the new rules and some exceptions for smaller businesses.

The government had decided how the general principles of MTDfB will operate after receiving responses to their original ideas first published in August 2016. Some legislation was published in Finance Bill 2017 but this was removed due to the General Election.

The new timetable is being introduced following concerns raised by the Treasury Select Committee, businesses and professional bodies about the implementation of the new rules and to hopefully ensure a smooth transition to a digital tax system.

Mel Stride, Financial Secretary to the Treasury and Paymaster General said:

‘Businesses agree that digitising the tax system is the right direction of travel. However, many have been worried about the scope and pace of reforms.

We have listened very carefully to their concerns and are making changes so that we can bring the tax system into the digital age in a way that is right for all businesses.’

The government has confirmed that under the new timetable:

only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes

they will only need to do so from 2019

businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020.

This means that businesses and landlords with a turnover below the VAT threshold will not have to move to the new digital system.

Ministers have also confirmed that the Finance Bill will be introduced as soon as possible after the summer recess and that all policies originally announced to start from April 2017 will be effective from that date.

The government has also confirmed that the proposed changes to VAT reporting will come into effect from April 2019. From that date, businesses trading above the VAT threshold will have to provide their VAT information to HMRC through Making Tax Digital software.

Taylor Review of employment practices

The long awaited Taylor Review of employment practices suggests that a national strategy is needed to help provide security in such areas as wages, quality of employment, education and training, working conditions, work life balance and the ability to progress at work.

One of the areas of focus relates to the ‘gig’ economy, with the report recommending the creation of a new category of worker, known as a ‘dependent contractor’, to provide additional rights and benefits for those who are currently classed as self-employed, but who work for businesses which have a ‘controlling and supervisory’ relationship with their workers.

The additional benefits would include sick pay, holiday entitlement and the minimum wage, and the new employment status would also oblige these businesses to pay national insurance contributions for these workers.

Business groups have given mixed reactions to the report’s findings, with many welcoming the focus on labour market flexibility, but also warning that some areas, including the plans to rewrite employment status tests, are a cause for concern.

However, the TUC warned that the review ‘is not the game-changer needed to end insecurity and exploitation at work’

Automatic enrolment reaches 8 million

The Pensions Regulator (TPR) has confirmed than eight million employees have signed up for a workplace pension since the launch of automatic enrolment.

The introduction of automatic enrolment was expected to lead to around eight million workers saving more for their retirement and this milestone has already been reached with hundreds of thousands more employers still to enrol staff over the coming months.

Minister for Pensions and Financial Inclusion Guy Opperman said:

‘Reaching this eight million figure is a formidable achievement and represents a huge number of people on the path to a more financially secure retirement.’

‘But we cannot be complacent and as contribution rates rise we know there is more to be done. That’s why our automatic enrolment review, which will report back later this year, is so vital to the future of this life-changing policy.’

TPR’s report shows that at the end of June 2017, 8,165,000 workers were enrolled in workplace pensions. Darren Ryder, TPR’s Director of Automatic Enrolment, said:

‘Tens of thousands more people every week are signing up to a new workplace pension through automatic enrolment. Employers are continuing to become compliant and to remain so, allowing their staff to get the pensions they are entitled to.’

‘There are more than 500,000 more employers whose duties are still to begin over the coming months. I would urge each and every one of them to check today that they know what they need to do and when they need to do it so they can seek our help if they need it.’

If you would like help or advice on complying with your Auto Enrolment duties please do get in touch.

Latest labour market statistics

The latest labour market statistics for the period March to May 2017 showed a 175,000 rise in employment and 64,000 fall in unemployment.

Estimates from the Labour Force Survey show that, between December 2016 to February 2017 and March to May 2017, the number of people in work increased, the number of unemployed people fell, and the number of people aged from 16 to 64 not working and not seeking or available to work (economically inactive) also fell.

Some of the findings were:

There were 32.01 million people in work, 175,000 more than the previous quarter.

The employment rate (the proportion of people aged from 16 to 64 who were in work) was 74.9%, the highest since comparable records began in 1971.

Latest estimates show that average weekly earnings for employees in Great Britain in nominal terms (that is, not adjusted for price inflation) increased by 1.8% including bonuses, and by 2.0% excluding bonuses, compared with a year earlier.

Latest estimates show that average weekly earnings for employees in real terms (adjusted for price inflation) fell by 0.7% including bonuses, and fell by 0.5% excluding bonuses, compared with a year earlier.

For more details visit the link below.

Anna Leach, CBI Head of Economic Intelligence, said:

‘These figures underline the strength of the UK’s flexible labour market, which was recognised in …. Taylor Review. But declining real pay and productivity remain concerning, reinforcing the imperative that any changes following the review support the economy’s ability to create great jobs.’

‘Making real progress on productivity growth requires a modern industrial strategy, with real change on the ground on skills, infrastructure and innovation.’

Charities bound by new Fundraising Preference Service

A new service is now available for individuals who want to limit the contact they receive from charities. The Fundraising Preference Service (FPS) should give individuals greater control over how and when charities can contact them. The FPS, which launched on 6 July, allows individuals to select charities that they no longer want to receive communications from.

Under the FPS, where an individual opts out from a specified charity, this will apply to all forms of communication with a named individual including email, text, phone and addressed mail.

Although the FPS is primarily an online service a phone service is available to support those who are vulnerable or without IT. The Fundraising Regulator will notify specified charities of suppression (those people opting out) and monitor compliance. Charities need to ensure they comply with these new rules.

Enews – July 2017

In this month’s eNews we report on the Queen’s speech and the legislative process. We also include articles on recommendations to simplify corporation tax, the extended deadline for returns for employment related securities, the introduction of Land Transaction Tax in Wales and the latest fines and guidance issued by the Information Commissioner’s Office following cyber attacks. With HMRC’s latest Employer Bulletin and advice on holiday pay and entitlement there is lots to consider.

Article Index

Queen’s Speech and proposed legislation

Simplifying corporation tax

Employment Related Securities return deadline

Land Transaction Tax

Holiday entitlement

Latest guidance for employers

ICO warning as business fined £60,000 following cyber attack

Queen’s Speech and proposed legislation

The Queen delivered the 2017 Queen’s Speech on 21 June which set out the government’s agenda for the coming parliamentary session. The speech outlined the government’s proposed policies and legislation.

This Queen’s speech announced that the government will focus on:

delivering a Brexit deal that works for all parts of the United Kingdom and

building a stronger, fairer country by strengthening our economy, tackling injustice and promoting opportunity and aspiration.

The supporting documentation confirms 27 Bills and draft Bills which are expected to be in the legislative programme, which will deliver on these themes. Details of the Bills that the government propose to introduce are available via the links at the end of this article.

The Speech and supporting documentation make little reference to delayed tax measures which were put on hold prior to the Election or the progress of the legislation on Making Tax Digital for Business. The reference to tax legislation states:

‘The programme will also include three Finance Bills to implement budget decisions. Summer Finance Bill 2017 will include a range of tax measures including those to tackle avoidance. The programme will also include a technical Bill to ratify several minor EU agreements and further Bills, which will be announced in due course, to effect the UK’s withdrawal from the EU. The government will also be taking forward a range of other measures which may not require primary legislation.’

Simplifying corporation tax

The Office for Tax Simplification has published their recommendations on simplifying the corporation tax computation.

This report sets out some significant steps towards creating a 21st-century corporation tax system in the UK, responding to calls from businesses of all sizes to make the calculation of corporation tax simpler, with fewer changes and more time to plan. The report looks at four broad themes:

simpler tax for smaller companies

aligning the tax rules more closely with accounting rules where appropriate

Employment Related Securities return deadline

HMRC are advising that there have been technical issues with their Employment Related Securities (ERS) annual returns online service. Employers have to complete returns for any schemes that have been registered on the ERS online service, such as Enterprise Management Incentives (EMI), a non-tax advantaged scheme or award, Company Share Option Plan, Save As You Earn Scheme and Share Incentive Plan

HMRC apologise for the difficulties which had prevented some returns from being submitted online. They have confirmed that the service is now working and allowing users to upload the necessary templates and files as part of the return process.

The deadline for filing annual returns is generally 6 July following the end of the tax year, so for the tax year 2016/17 it would usually be 6 July 2017. However, in view of the recent problems HMRC have extended the deadline to 24 August 2017 for the tax year 2016/17.

Penalties for late returns

Due to the change in deadline this year HMRC are advising that:

‘Penalties are charged if you file your return late. If your return isn’t filed by the extended deadline of 24 August 2017 the first late filing penalty of £100 will be issued on 25 August 2017.

Additional automatic penalties of £300 will be charged if the return is still outstanding 3 months after the original deadline of 6 July, and a further £300 if it’s still outstanding 6 months after that date. If a return is still outstanding 9 months after the 6 July, daily penalties of £10 a day may be charged.’

If you would like any help or guidance on share incentives or how these should be reported to HMRC please contact us.

Land Transaction Tax

From April 2018, Land Transaction Tax (LTT) will replace Stamp Duty Land Tax (SDLT) in Wales. Land and Buildings Transaction Tax (LBTT) already applies in Scotland.

Like SDLT (and LBTT), LTT will generally be payable on the purchase or lease of a building or land. The new tax may therefore be relevant to house buyers and sellers and businesses including builders, property developers and agents involved in the transaction process (such as solicitors and conveyancers).

Rates of the new tax

The proposed tax rates and bands will be announced by October 2017.

Additional residential properties

Higher rates of SDLT and LBTT apply to purchases of additional residential properties, including second homes. The National Assembly for Wales has confirmed these increased rates will continue to apply in Wales under LTT.

ICO warning as business fined £60,000 following cyber attack

The Information Commissioner’s Office (ICO) is warning SMEs to take care or face a fine. The warning comes after a company which suffered a cyber attack was fined £60,000.

The investigation by the ICO found Boomerang Video Ltd based in Berkshire failed to take basic steps to stop its website being attacked.

Sally Anne Poole, ICO enforcement manager, said:

‘Regardless of your size, if you are a business that handles personal information then data protection laws apply to you.’

‘If a company is subject to a cyber attack and we find they haven’t taken steps to protect people’s personal information in line with the law, they could face a fine from the ICO. And under the new General Data Protection Legislation (GDPR) coming into force next year, those fines could be a lot higher.’

‘Boomerang Video failed to take basic steps to protect its customers’ information from cyber attackers. Had it done so, it could have prevented this attack and protected the personal details of more than 26,000 of its customers.’

Further details of the case can be found using the links below together with guidance on data protection issues including guidance on the new General Data Protection Regulations which come into effect on 25 May 2018.

Enews – June 2017

In this month’s eNews we report on the roll out of tax free childcare and the guidance available for parents on the choices and support available, the latest advisory fuel rates and labour market statistics. With guidance on cyber security, the latest report from the Pensions Regulator and what the Small Business Taskforce wants following the election there is lots to consider.

Article Index

Tax-Free Childcare and childcare options

Small Business Taskforce outlines priorities ahead of the General Election

Advisory fuel rates for company cars

Guidance protects against ‘ransomware’ attacks

TPR name and shame those who fail to comply

Rising employment statistics

Tax-Free Childcare and childcare options

Tax-Free Childcare, the new government scheme to help working parents with the cost of childcare launched at the end of April and is being rolled out to parents, starting with those parents with the youngest children first.

For every £8 a parent pays in, the government will pay in an extra £2. Parents can receive up to £2,000 per child, per year, towards their childcare costs making a total amount of £10,000. Higher limits of £4,000 and £20,000 apply for disabled children.

To qualify for Tax-Free Childcare parents and partners in the household must generally meet a minimum income level of on average £120 a week and each earn less than £100,000 a year.

The scheme will be available for children up to the age of 12, or 17 for children with disabilities. All eligible parents will be able to join the scheme by the end of 2017. Those eligible will be able to apply for all their children at the same time although the government rollout will start with the youngest children first. Parents will need to open an online account, which they can use to pay for childcare from a registered provider.

For those employers who currently offer Employer Supported Childcare, usually in the form of childcare vouchers, these schemes can remain open to new entrants until April 2018. Existing members have the option to remain in their existing scheme or change over to Tax-Free childcare as their child becomes eligible. It is not possible to benefit from tax-free childcare and employer supported childcare at the same time.

A calculator for parents comparing the options and guidance on the other government provided free childcare available are available on GOV.UK.

Small Business Taskforce outlines priorities ahead of the General Election

The Small Business Taskforce has outlined its priorities ahead of the General Election.

The Taskforce which is made up of 14 organisations, including the Institute of Chartered Accountants in England and Wales (ICAEW), Enterprise Nation and the Entrepreneurs Network, has set out six key recommendations in its election manifesto to help ‘build a positive and progressive business case for Britain’.

The Taskforce is recommending the next government should provide an environment which ‘champions the role of small businesses’ and creates a tax system that supports businesses of all sizes.

They also call for the next government to provide an advantageous pensions and benefits system, supply procurement opportunities that are beneficial to all and create a workforce that is equipped for enterprise.

Clive Lewis, Head of Enterprise at the ICAEW, commented:

‘Whatever the outcome on 8 June, the incoming government must provide a solid platform for small businesses to flourish and grow.’

‘Currently businesses are cautious about the future and are holding back on investment, therefore it’s vital that, in the run-up to the General Election, all political parties spell out how they plan to encourage businesses to invest in long-term growth.’

To read more of the Small Business Taskforce’s manifesto visit the following link.

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 June 2017. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 June 2017 are:

Guidance protects against ‘ransomware’ attacks

The National Cyber Security Council (NCSC) has published guidance for small businesses about how they can prevent, detect and respond to ransomware attacks following the widespread ‘WannaCry’ ransomware attack in early May.

Further guidance has been produced by the Charity Commission for England and Wales for charity trustees on this issue.

TPR name and shame those who fail to comply

The latest Compliance and Enforcement Bulletin from the Pensions Regulator (TPR) makes interesting reading as it sets out cases and the powers TPR have used relating to automatic enrolment and associated employer duties.

TPR are maintaining a tough approach towards those employers who try to get away with not giving their staff the pension that they are due. The latest development is to publish details of those who have paid their Escalating Penalty Notice (EPN) but remain non-compliant. We will also publish the details of those who failed to pay their EPN, and as a result have been made subject to a court order.

The details published will include the employer’s name, the penalty amount, and the first part of their postcode.

Rising employment statistics

The Office for National Statistics has published the latest employment statistics which reveal:

Estimates from the Labour Force Survey show that, between October to December 2016 and January to March 2017, the number of people in work increased, the number of unemployed people fell, and the number of people aged from 16 to 64 not working and not seeking or available to work (economically inactive) also fell.

There were 31.95 million people in work, 122,000 more than for October to December 2016 and 381,000 more than for a year earlier.

The employment rate (the proportion of people aged from 16 to 64 who were in work) was 74.8%, the highest since comparable records began in 1971.

There were 1.54 million unemployed people (people not in work but seeking and available to work), 53,000 fewer than for October to December 2016 and 152,000 fewer than for a year earlier.

The unemployment rate (the proportion of those in work plus those unemployed, that were unemployed) was 4.6%, down from 5.1% for a year earlier and the lowest since 1975.

There were 8.83 million people aged from 16 to 64 who were economically inactive (not working and not seeking or available to work), 40,000 fewer than for October to December 2016 and 82,000 fewer than for a year earlier.

The inactivity rate (the proportion of people aged from 16 to 64 who were economically inactive) was 21.5%, down from 21.8% for a year earlier and the joint lowest since comparable records began in 1971.

Latest estimates show that average weekly earnings for employees in Great Britain in nominal terms (that is, not adjusted for price inflation) increased by 2.4% including bonuses, and by 2.1% excluding bonuses, compared with a year earlier.

Latest estimates show that average weekly earnings for employees in Great Britain in real terms (that is, adjusted for price inflation) increased by 0.1% including bonuses, but fell by 0.2% excluding bonuses, compared with a year earlier.’

‘Therefore maintaining the UK’s reputation as a great place to do business, for example by increasing R&D spend to 3% of GDP by 2025, will help boost the UK’s productivity. This is the only sustainable route to higher wages, and better living standards.’

On Top of the World!!

Darnells Chartered Accountants and Business Advisers are delighted that Trainee Accountant Kelly Wakeham based at their Totnes Office has recently been informed that she passed her first exam of her ACCA (Association of Chartered Certified Accountants) with a pass mark of 86 of 100. Kelly received the good news direct from the ACCA and that she had received the highest mark worldwide for the F6 Taxation paper and has won a Global Prizewinner award.

Kelly says, ‘With the F6 Taxation exam being my first exam for my ACCA qualification, I really didn’t expect to become a Global Prizewinner, achieving the highest mark worldwide. But with a lot of study and endless question practice after question practice it just shows that hard work really does pay off. When I left school I didn’t want to go to university, but accountancy provided the perfect opportunity to work and learn in a highly regarded profession with the option of obtaining a degree. Having grown up on my family farm I have a particular interest in agriculture and I would like to build on my knowledge in agricultural accounting.’

Kelly joined Darnells in May 2015 and are delighted with her major achievement and that Kelly shows such a promising future.

April 2017 – Simon Wood FCCA is the newest Partner at Darnells

Congratulations to Simon Wood FCCA, who is the newest Partner at Darnells Chartered Accountants and Business Advisers.

All the Partners and staff wish Simon every success.

Nomination for Chelsea!

Exeter College’s Apprenticeship and Employer Awards celebrate outstanding Apprentices and honours the businesses that support the work of the Apprenticeship Programme. The awards mark an outstanding year for the college having achieved record Apprenticeship success rates, engaged the highest number of Apprentices and being named top college in the South West for Apprenticeship Provision. Chelsea Northcott of Darnells Chartered Accountants and Business Advisers has received a nomination. Darnells is a growing and well-regarded firm of accountants with offices in Exeter, Newton Abbot and Totnes.

‘Chelsea works in the Corporate Department with a team which is principally engaged on audits and on accounts preparation for a wide range of clients. She is a valued member of the team. Her studies have given her a good base of knowledge and understanding and she is good at applying the knowledge gained to her practical work. The quality of Chelsea’s working papers has been commented on and this reflects well on her organised and diligent approach. Her recent study of prepayments and accruals for AAT has added to her ability to produce a good extended trial balance and she is already looking forward to the module on VAT, a topic which she has begun to encounter in her practical work. The firm values Chelsea’s commitment to her AAT apprenticeship and her studies at Exeter College have undoubtedly helped with her practical development. She has gained in confidence since starting Level 3 and is keen to take on more responsibility as her breadth of knowledge improves’.

Mike Blakeley, Head of Business Solutions and Enterprise at Exeter College said “Our recognised success as a provider is down to the hard work and dedication of our employers and their Apprentices. It’s an honour to be able to celebrate their achievements. The event focuses on our winners but it also recognises the success of all our Apprentices and the efforts of our exceptional business network within the south west.”

The event is being held at Sandy Park on Tuesday 28th February and will feature guest speaker RFU referee Luke Pearce. Best of luck Chelsea!!

February 2017 – Update

Congratulations Chelsea!! On receiving your award for Apprentice of the Year 2017 from Exeter College, along with 98% on her first Level 3 exam.

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